ABSTRACT
Bangladesh is one of the least developed countries. It is a predominantly agricultural economy, with 60 per cent of GNP and 80 per cent of employment located in this sector (Taslim 1980: 28). Its monetised economy, which refers to the modern industrial sector, has two elements: the organised and the unorganised money markets. The organised money market includes the Bangladesh Bank, private and nationalised commercial banks (both foreign and domestic) and various other financial intermediaries, such as specialised banks and insurance companies. The Bangladesh Bank is the institution formally responsible for monetary policy, but the government plays a dominant role and most policy decisions are made by the Governor in close consultation with the Minister of Finance. The Bangladesh Bank assists the government in its borrowing operations. The structure of interest rates in the organised sector is highly diversified and subject to widespread government regulation. The unorganised money market dominates the provision of credit in the rural areas and is made up of local money-lenders, landlords and commission agents. Interest rates tend to be very much higher in the unorganised segment and there is little in the way of linkage with the organised money market (Wahid 1986). Over the period studied, Bangladesh has operated a very cautious policy at the behest of the IMF. Because of very low levels of monetary expansion it may be hard to detect the linkages which would be apparent in a more inflationary economy.
