Internal and External Balance with Expenditure Changing and Switching Policies in Bangladesh: An Empirical Analysis

Monzur Morshed

Abstract

This paper studies macroeconomic effects of internal and external balance with Expenditure changing and switching policies about Bangladesh. Expenditure switching policies are measures that shift expenditure between the domestic and external sectors, typically by increasing exports and decreasing imports of goods and services. Exchange rate adjustment is often combined with monetary and fiscal tightening as part of a comprehensive adjustment program featuring both expenditure-changing and expenditures witching measures. This paper shows the relation on exchange rate between government expenditure and money supply. If fiscal expansion--either government expenditure increase or tax cuts¾ raises output, but worsens current account balances. Conversely, fiscal contraction improves current account balances, but lowers output. In this paper it also seen that when money supply increases that time there create dual effect country faces inflation on the other hand currency devaluated as a result export increase.

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