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Paradigm Shift in Development Economics: Deconstructing Bangladesh's Transition from Fragility to Sustainable Growth Through Institutional, Demographic and Policy Innovations
Get PDFThis paper undertakes an in-depth exploration of the multifaceted economic and socio-political forces that have catalyzed Bangladesh’s progression from the stagnation and institutional fragility characteristic of its pre-independence and post-conflict phases to its current status as a resilient and steadily advancing South Asian economy. The country's journey from a devastated, least-developed nation to one on the cusp of achieving upper-middle-income status exemplifies a dynamic model of structural transformation. This analytical discourse focuses on macroeconomic restructuring, investment and trade liberalization, innovations in agricultural technologies, and the stabilizing influence of diaspora remittances. From a broader socio-economic lens, the study evaluates pivotal themes such as demographic transitions, educational advancement, public health outcomes, gender equity, and the socio-spatial dynamics of rapid urbanization. Moreover, the research critically interrogates persistent developmental bottlenecks—namely poverty, inequality, ecological vulnerabilities, and institutional inefficiencies—while emphasizing the centrality of digital and technological integration to future progress. Through this comprehensive synthesis, the paper elucidates the strategic policy interventions instrumental in facilitating Bangladesh’s growth trajectory and proposes future pathways for sustaining its momentum
Double-Hopf bifurcation in an extended Goodwin model with Mechanization, Independent Investment, and Disequilibrium: Toward a Marxian-Keynesian Synthesis
Get PDFThis paper proposes an extended Goodwin model that synthesizes Marxian and Keynesian dynamics into a unified four-dimensional framework. The model integrates endogenous technical change via mechanization, investment behavior driven by effective demand, and goods market disequilibrium. We develop two three-dimensional closures–a Classical-Marxian and a Keynesian-Kaleckian formulation–each capable of generating persistent endogenous cycles through Hopf bifurcations. These are then combined into a Marxian-Keynesian (MK) system, which exhibits complex dynamics including quasi-periodicity and, under specific parameter values, a double-Hopf bifurcation. This result, to our knowledge not previously identified in extended Goodwin models, points to the potential for interacting oscillatory modes and long-run fluctuations even with relatively simple behavioral rules. Numerical simulations suggest that the MK synthesis captures rich endogenous fluctuations without relying on exogenous shocks and may exhibit chaotic dynamics under future extensions. These findings lay the groundwork for a more comprehensive Mars-Keynes-Schumpeter synthesis of capital instability, as suggested in the conclusion section
GARCH-FX: A Modular Framework for Stochastic and Regime-Aware GARCH Forecasting
Get PDFTraditional GARCH models, while robust, are deterministic and their long-horizon forecasts converge to a static mean, failing to capture the dynamic nature of real markets. Conversely, classical stochastic volatility models often introduce significant implementation and calibration complexity. This paper introduces GARCH-FX (GARCH Forecasting eXtension), a novel and accessible framework that augments the classic GARCH model to generate realistic, stochastic volatility paths without this prohibitive complexity.
GARCH-FX is built upon the core strength of GARCH—its ability to estimate long-run variance—but replaces the deterministic multi-step forecast with a stochastic simulation engine. It injects controlled randomness through a Gamma-distributed process, ensuring the forecast path is non-smooth and jagged. Furthermore, it incorporates a modular regime-switching multiplier, providing a flexible interface to inject external views or systematic signals into the forecast’s mean level.
The result is a powerful and intuitive framework for generating dynamic long-term volatility scenarios. By separating the drivers of mean-level shifts from local stochastic behavior, GARCHFX aims to provide a practical tool for applications requiring realistic market simulations, such as stress-testing, risk analysis, and synthetic data generation
Estimating the R-Star in the US: A Score-Driven State-Space Model with Time-Varying Volatility Persistence
Get PDFThis paper analyses the dynamics of the natural rate of interest (r-star) in the US using a score-driven state-space model within the Laubach–Williams structural framework. Compared to standard score-driven specifications, the proposed model enhances flexibility in variance adjustment by assigning time-varying weights to both the conditional likelihood score and the inertia coefficient in the volatility updating equations. The improved state dependence of volatility dynamics effectively accounts for sudden shifts in volatility persistence induced by highly volatile unexpected events. In addition, allowing time variation in the IS and Phillips curve relationships enables the analysis of structural changes in the US economy that are relevant to monetary policy. The results indicate that the advanced models improve the precision of r-star estimates by responding more effectively to changes in macroeconomic conditions
GARCH-FX: A Modular Framework for Stochastic and Regime-Aware GARCH Forecasting
Get PDFTraditional GARCH models, while robust, are deterministic and their long-horizon forecasts converge to a static mean, failing to capture the dynamic nature of real markets. Conversely, classical stochastic volatility models often introduce significant implementation and calibration complexity. This paper introduces GARCH-FX (GARCH Forecasting eXtension), a novel and accessible framework that augments the classic GARCH model to generate realistic, stochastic volatility paths without this prohibitive complexity.
GARCH-FX is built upon the core strength of GARCH—its ability to estimate long-run variance—but replaces the deterministic multi-step forecast with a stochastic simulation engine. It injects controlled randomness through a Gamma-distributed process, ensuring the forecast path is non-smooth and jagged. Furthermore, it incorporates a modular regime-switching multiplier, providing a flexible interface to inject external views or systematic signals into the forecast’s mean level.
The result is a powerful and intuitive framework for generating dynamic long-term volatility scenarios. By separating the drivers of mean-level shifts from local stochastic behavior, GARCH-FX aims to provide a practical tool for applications requiring realistic market simulations, such as stress-testing, risk analysis, and synthetic data generation
Inflationary and Deflationary Pressures: A Behavioral Decomposition of U.S. Inflation Dynamics
Get PDFThis paper develops a novel behavioral decomposition of inflation as the net outcome of two competing forces: inflationary pressure, defined by the frequency and magnitude of price increases, and deflationary pressure, determined by corresponding price decreases. Using 245 PCE sub-indices spanning 1959-2024, we construct an exact bottom-up inflation measure that transparently maps sectoral price-setting behavior into macroeconomic aggregates. Our decomposition reveals fundamental asymmetries in inflation formation: inflationary pressure exhibits dramatic variation (2.35%-12.68%) while deflationary pressure remains remarkably stable (0.72%-5.18%), indicating inflation episodes are primarily driven by surges in upward pricing momentum rather than retreats of downward movements. Historical analysis shows distinct pressure regimes across major macroeconomic episodes: the Great Inflation featured extreme inflationary pressure volatility, the Great Moderation achieved balanced dynamics, the 2008-2009 crisis uniquely witnessed deflationary pressure dominance creating deflation risk, while COVID-19 saw dramatic inflationary pressure resurgence. We reassess the price puzzle using Bayesian local projections with alternative monetary policy shock identifications. Conventional narrative shocks generate sustained inflationary pressure increases with minimal deflationary response, while informationally robust shocks resolve the puzzle completely through both increased deflationary pressure and reduced inflationary pressure, with the deflationary channel providing the dominant contribution consistent with demand-channel transmission. Extensive robustness checks across specifications and estimation methods confirm these findings while revealing the diagnostic value of pressure decomposition for evaluating shock quality. Results demonstrate that the price puzzle reflects informational frictions rather than genuine economic phenomena, and suggest successful monetary policy operates through managing pressure balance with important implications for real-time policy diagnosis and central bank communication
The economics and finance of dividend-based labor remuneration and tradable shares in worker cooperatives
Get PDFThis paper examines the economic and financial implications of implementing a comprehensive system of dividend-based labor compensation for members of worker cooperatives. The economic implications, as presented in the existing literature, are discussed at both the microeconomic and macroeconomic levels, as already presented prominently in the work of James Meade and Martin Weitzman. The financial implications concern the creation of a clear link between dividend-based remuneration and the financial position of worker-members as owners of a cooperative's capital; the alignment of interests between worker-members and non-member financial investors when creating a true cooperative share market; and the decoupling of financial participation of members and non-members from control rights (cooperative shares would be non-voting) to protect the formal and substantive role of the mutualistic ‘one member, one vote’ principle of democratic governance
Chocs et redéfinition des objectifs macroéconomiques vers une redéfinition du rôle de l’État
Get PDFThis paper explores how both external and internal shocks act as catalysts for the reassessment of macroeconomic objectives and the redefinition of the role of the State in economic governance. In recent decades, a succession of economic crises—ranging from global financial disruptions to pandemics and commodity price volatility—has exposed the structural weaknesses and limitations of prevailing macroeconomic paradigms. These traditional frameworks, often centered on market efficiency and minimal state intervention, have proven insufficient in addressing systemic vulnerabilities and ensuring long-term stability, particularly in developing and resource-dependent economies.
The paper argues that these shocks necessitate a paradigmatic shift in public policy orientation, whereby the State must evolve from a passive market facilitator into an active economic stabilizer and strategic investor. Drawing on empirical insights and theoretical frameworks, the authors analyze how governments can play a proactive role in strengthening economic resilience through counter-cyclical policies, strategic investment in public goods, and improved institutional capacity.
Particular attention is given to the African context, where economic structures are often highly sensitive to exogenous shocks due to limited diversification, weak fiscal buffers, and overreliance on commodity exports. In such settings, the need for adaptive and forward-looking policy frameworks becomes even more pressing. The paper underscores the importance of redefining fiscal and monetary priorities, not only to manage shocks in the short term but also to lay the groundwork for inclusive and sustainable development.
Furthermore, the authors emphasize the role of the State in promoting structural transformation through targeted support for key sectors, infrastructure development, and investments in human capital. A strategic public sector engagement, guided by clear macroeconomic objectives, can reduce socioeconomic inequalities and create the conditions for a more robust and self-reliant economy.
In conclusion, the paper advocates for a recalibration of macroeconomic governance that places resilience, sustainability, and equity at the core of policy design. Such a transformation calls for rethinking the balance between markets and the State, not as a binary choice, but as a dynamic complementarity necessary for development in an increasingly uncertain and interdependent global economy
To Bubble or Not to Bubble: Asset Price Dynamics and Optimality in OLG Economies
Get PDFWe study an overlapping generations (OLG) exchange economy with an asset that yields dividends. First, we derive general conditions, based on exogenous parameters, that give rise to three distinct scenarios: (1) only bubbleless equilibria exist, (2) a bubbleless equilibrium coexists with a continuum of bubbly equilibria, and (3) all equilibria are bubbly. Under stationary endowments and standard assumptions, we provide a complete characterization of the equilibrium set and the associated asset price dynamics. In this setting, a bubbly equilibrium exists if and only if the interest rate in the economy without the asset is strictly lower than the population growth rate and the sum of per capita dividends is finite. Second, we establish necessary and sufficient conditions for Pareto optimality. Finally, we investigate the relationship between asset price behaviors and the optimality of equilibria
SME Financing – How to Bridge the Persistent Demand Supply Gap?
Get PDFIndia's micro, small, and medium enterprises (MSMEs) serve as a critical engine of employment and economic growth, yet they face persistent credit gaps, particularly among unincorporated and high-growth micro-enterprises known as Hired Worker Enterprises (HWEs). Existing interventions have saturated the microcredit market without generating proportional employment or income gains, primarily due to the structural mismatch between rigid, fixed-installment loan products and the fluctuating cashflows of small enterprises. This paper critiques the current MSME financing architecture, analyzing the limited employment impact of microfinance loans and the rising delinquency rates. It then proposes an alternative model of cashflow-based credit, wherein repayment obligations dynamically adjust to enterprise revenues, reducing default risk while supporting sustainable growth. Drawing on action research pilots and policy experiments in India, we outline the design of scalable, risk-mitigated cashflow financing instruments, including revenue-linked repayments and micro-equity components, tailored to the realities of small business operations. We estimate that such reforms could unlock ₹15 lakh crore in responsible credit and facilitate 10 crore jobs without imposing fiscal burdens on the government