Tourism is one of the promising sectors for Bangladesh.

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PurposeThis paper aims to investigate the impact of selected macro-economic variables like real effective exchange rate (REER), GDP, inflation (INF), the volume of trade (TR) and money supply (M2) on-budget deficit (BD) in Bangladesh over the period of 1980–2018.Design/methodology/approachBy using secondary data, the paper uses the Vector Error Correction Model (VECM) and Granger Causality test. Johansen’s cointegration test is used to examine the long-run relationship among the variables under study.FindingsJohansen’s cointegration test result shows that there exists a positive long-run relationship of selected macroeconomic variables (real effective exchange rate, inflation, the volume of trade and money supply) with the budget deficit, whereas GDP has a negative one. The short-run results from the VECM show that GDP, inflation and money supply have a negative relationship with the budget deficit. The Granger Causality test results reveal unidirectional causal relationships running from BD to REER; TR to BD; M2 to BD; GDP to REER; M2 to REER; INF to GDP; GDP to TR; M2 to GDP and bidirectional causal relationship between GDP and BD; TR and REER; M2 and TR.Originality/valueBangladesh has been experiencing a budget deficit since 1972 due to a decline in sources of revenue. This study contributes to the empirical debate on the causal nexus between macroeconomic variables and budget deficits by employing VECM and Granger Causality approaches.

This research examines the impact of remittances on the economic progress of developing countries such as Bangladesh, which receives significant amount of remittance. To investigate this, we used a time series analysis to undertake an empirical study for Bangladesh from 1995 to 2016. Several time series techniques are used in this work, including the Johansen–Juseliues test and the Granger causality test. We discovered that in the long run, overseas remittances have a greater impact on economic growth (per capita GDP). There also exists a unidirectional causality among the variables such as foreign remittances and domestic investment. In the coming days, we recommend that the Bangladesh government be cautious and smart in preserving bilateral and multilateral relationships with donor organizations and countries, with a particular focus on achieving the Sustainable Development Goals (SDGs).

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