Does nominal devaluation improve income distribution? Evidence from Bangladesh

Shahbaz, Muhammad and Rahman, Mohammad Mafizur (2012) Does nominal devaluation improve income distribution? Evidence from Bangladesh. South Asian Survey, 19 (1). pp. 61-77. ISSN 0971-5231


The present paper aims to investigate the impact of nominal devaluation on income distribution in Bangladesh both in short and long runs. In doing so, ARDL (Auto Regressive Distributed Lag) bounds testing has been employed for cointegration, and ECM (Error Correction Model) has been used for short run dynamics. The empirical psychology has confirmed the existence of long run relationship between the variables. The ARDL-OLS estimated results reveal that nominal devaluation tends to decrease income inequality. Though economic growth appears to improve income distribution, non-linear link between both the variables, however, depicts Kuznets' inverted-U curve (1955). Financial development causes further deterioration in income distribution. Trade-openness contributes to income inequality as discussed in Leontief Paradox.

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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: © 2012 ICSAC. Permanent restricted access to published version due to publisher copyright policy.
Faculty/School / Institute/Centre: Historic - Faculty of Business and Law - School of Accounting, Economics and Finance
Date Deposited: 18 Jun 2013 01:47
Last Modified: 09 Feb 2017 00:53
Uncontrolled Keywords: devaluation; income inequality; co-integration; economic growth; financial development; trade openness; Bangladesh
Fields of Research : 14 Economics > 1402 Applied Economics > 140212 Macroeconomics (incl. Monetary and Fiscal Theory)
14 Economics > 1403 Econometrics > 140302 Econometric and Statistical Methods
16 Studies in Human Society > 1605 Policy and Administration > 160505 Economic Development Policy
Socio-Economic Objective: B Economic Development > 91 Economic Framework > 9101 Macroeconomics > 910101 Balance of Payments
Identification Number or DOI: 10.1177/0971523114539586

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