Navigating Economic Stability: Interest Rate Corridors in Bangladesh Bank's Policy Framework

This research proposed and examined a strategic shift for the Bangladesh Bank from a monetary aggregate-based policy towards an Interest Rate Corridor (IRC) framework. It identified limitations of the current monetary transmission mechanisms and highlighted how adopting IRC can stabilize short-term interest rates, improve liquidity management, and foster macroeconomic stability in Bangladesh. This research is significant because it addresses the evolving socio-economic landscape of Bangladesh, including challenges such as ineffective monetary transmission mechanisms, expansion of Islamic banking, and underdeveloped financial markets. By proposing the IRC, it offers a tailored solution aimed at aligning Bangladesh's monetary policy with global best practices, enhancing economic resilience, and supporting sustainable growth. How effectively do you think the proposed Interest Rate Corridor framework can address monetary transmission inefficiencies in similar emerging economies?