Assessing the Impact of the Global Economic and Financial Crisis on Bangladesh: An Intervention Analysis

The global financial and economic crisis had a lagged impact on the economy of Bangladesh, resulting in declines in export, import, foreign direct investment (FDI) and foreign aid inflows. All these had concomitant negative effects on the country’s various socio-economic indicators including the gross domestic product (GDP) growth rate and per capita income. While a number of papers have used descriptive analysis to investigate the sectoral impacts of the crisis in Bangladesh, this paper incorporates an Intervention Analysis approach with Vector Autoregression to extend a Solow growth model to explore the impact of the global crisis on the key economic indicators of Bangladesh. The study finds that due to the crisis, Bangladesh lost approximately 0.60 per cent of real GDP per capita growth in 2009; equivalent to a loss of USD 2 billion in real GDP.