Inflation: The Effect of Macroeconomic Factors

Abstract: This study examines the macroeconomic determinants of inflation in Bangladesh from 2000 to 2023, focusing on GDP growth, money supply (M2), interest rate, and exchange rate. Using annual data and applying Ordinary Least Squares (OLS) regression alongside Pearson correlation, the analysis explores both monetary and demand-side influences on inflation. The results reveal that GDP growth and money supply have significant and positive effects on inflation, highlighting the importance of domestic monetary expansion and output growth in driving price levels. In contrast, interest rate and exchange rate show weak and statistically insignificant associations with inflation during the study period. The study concludes that achieving long-term price stability requires stronger monetary management, with strategic emphasis on inflation targeting and aggregate demand regulation. Keywords: Inflation; Macroeconomic Indicators; Monetary Policy; Economic Growth; Economy of Bangladesh.