The adoption of inflation targeting (IT) as a monetary policy framework has been widely recognized as a key strategy for maintaining price stability and promoting long-term economic growth. Since its inception in the early 1990s, particularly with the success of New Zealand and the UK, inflation targeting has been hailed for its ability to anchor inflation expectations and reduce inflation volatility. This approach involves central banks setting explicit inflation targets, thereby enhancing transparency, credibility, and accountability. The goal of inflation targeting is not only to stabilize prices but also to create a predictable macroeconomic environment that fosters investment and sustainable growth (Bonna S., 2021).

In Bangladesh, inflation targeting was formally introduced in 2005 as part of a broader effort to stabilize the economy, control inflation, and align its monetary policy with international standards. The Bangladesh Bank, the country's central bank, adopted a target range of 6-7% annual inflation, aiming to maintain price stability while simultaneously supporting economic growth. Given the country's reliance on imports for essential goods, particularly food and fuel, inflation targeting was seen as a necessary framework to ensure the stability of domestic prices in the face of external economic shocks.

However, the effectiveness of inflation targeting in Bangladesh, like in many emerging economies, has been subject to considerable debate. While inflation targeting has undoubtedly contributed to a reduction in inflation volatility, its success in achieving sustained price stability has been mixed. Bangladesh's experience with inflation targeting reveals the complexities and limitations of applying this framework in a developing economy with a unique set of structural vulnerabilities. These vulnerabilities include dependence on imported goods, susceptibility to external price shocks, political interference, and weak fiscal-monetary coordination, all of which can complicate the central bank's ability to manage inflation effectively. Additionally, the country's vulnerability to climate-induced economic disruptions - particularly in the agricultural sector - further challenges the central bank's ability to meet inflation targets consistently.

Bangladesh's economic structure also presents significant challenges to the implementation of inflation targeting. The informal sector plays a crucial role in the country's economy, particularly in rural areas, where inflationary pressures are often tied to agricultural production cycles that are highly sensitive to changes in weather patterns and global food prices. Furthermore, the limited financial infrastructure, alongside the central bank's lack of sufficient tools to influence inflation expectations in an effective manner, has made it difficult to achieve and sustain inflation targets. The absence of a fully developed financial market and the challenges in forecasting inflation has further hindered the Bangladesh Bank's capacity to deliver on its monetary policy objectives.

Additionally, external shocks - such as fluctuations in commodity prices, global inflation trends, and the impact of climate change on agriculture - are significant factors influencing inflation in Bangladesh. The country's exposure to the global economic environment means that inflationary pressures often stem from forces beyond the central bank's control, such as rising oil prices, food price volatility, and currency depreciation. These external shocks complicate the central bank's ability to maintain inflation within the target range, leading to periods of inflation that exceed the desired level, often causing macroeconomic instability.

Despite these challenges, there have been notable successes in reducing inflation volatility since the adoption of inflation targeting in Bangladesh. The central bank's ability to set clear expectations about the future path of inflation has helped anchor expectations and stabilizes inflation in the medium term. However, the relationship between inflation, interest rates, and other macroeconomic variables in Bangladesh is more complex than in advanced economies, which calls for a more nuanced and flexible approach to monetary policy. While inflation targeting has helped to mitigate extreme fluctuations in inflation, it remains susceptible to the volatile nature of global prices and domestic supply-side constraints.

This research aims to evaluate the effectiveness of inflation targeting in Bangladesh's monetary policy framework. The objective is to critically assess whether the implementation of this policy framework has achieved its intended goals of stabilizing inflation and promoting economic growth in a developing economy. The study will explore the challenges posed by Bangladesh's economic structure, focusing on external shocks, the political environment, and the role of climate change risks. Furthermore, the research will examine how Bangladesh Bank has navigated these challenges and propose recommendations for improving the effectiveness of inflation targeting in the country.

This article is organized as follows: the literature review will first examine the theoretical underpinnings and global experiences with inflation targeting, particularly in emerging markets. The study will then outline its specific objectives, methodology, and research design. The findings from the analysis of Bangladesh's inflation targeting performance will be discussed in detail, and the paper will conclude with recommendations aimed at enhancing the effectiveness of inflation targeting in Bangladesh's unique economic context. By examining the practical outcomes of inflation targeting, this research seeks to provide valuable insights into how central banks in emerging markets can better manage inflation in the face of external and internal challenges.

Inflation targeting (IT), as a monetary policy framework, has been widely adopted by numerous economies around the world, particularly since the early 1990s. The success of IT in reducing inflation and anchoring inflation expectations has been well-documented in many advanced economies. Bernanke et al. (1999) emphasized the role of IT in achieving price stability and enhancing central bank credibility. According to their research, countries that adopted IT, such as New Zealand, Canada, and the UK, were able to reduce inflation volatility and keep inflation within the desired range by using clear communication strategies and transparent policy tools.

In advanced economies, IT has generally been effective because these economies have well-established institutional frameworks, robust financial markets, and greater central bank independence. Svensson, (1997) further supports this, arguing that inflation targeting is more effective in environments where central banks are independent and have a high degree of credibility. The transparency of policy actions, such as announcing explicit inflation targets, helps shape public expectations, which in turn contributes to lower inflation.

However, the experience of emerging economies with inflation targeting has been more complex. According to Mishkin and Schmidt-Hebbel, (2007) inflation targeting in emerging markets often leads to a reduction in inflation volatility but can result in higher output volatility. Emerging economies are more vulnerable to external shocks, such as fluctuations in commodity prices, global financial crises, and political instability. These factors can make it difficult for central banks to achieve price stability, as they lack the same degree of control over external variables. Gonzalez, (2009) finds that in countries like Bangladesh, external factors - particularly global oil price fluctuations and food price volatility - often derail the effectiveness of inflation targeting.

The adoption of inflation targeting in developing economies like Brazil, South Africa, and Mexico shows both successes and challenges. For example, Mexico has had success in controlling inflation through a transparent IT framework, but the country's exposure to global commodity price fluctuations continues to complicate its policy objectives. Similarly, Brazil adopted inflation targeting with an initial success in controlling inflation, but currency depreciation and political factors have hindered its long-term effectiveness (Mujeri et al., 2021).

Bangladesh's experience with inflation targeting began in 2005, following the example of many emerging economies seeking to stabilize inflation and promote economic growth. Bangladesh Bank, the country's central bank, set an inflation target of 6-7%, aiming to reduce inflation volatility and ensure a stable economic environment conducive to long-term growth. However, the effectiveness of this policy framework in Bangladesh has been a subject of ongoing debate.

Research by Ahamed, (2016) suggests that inflation targeting could be effective in Bangladesh, given its increasing integration into the global economy, improved data collection mechanisms, and greater access to financial markets. The adoption of an explicit inflation target was intended to help stabilize inflation expectations and reduce uncertainty in the economy. However, empirical evidence, such as Rahman and Rahman, (2018) shows mixed results. While inflation volatility has decreased, the actual achievement of the inflation target has been inconsistent, particularly during periods of external shocks such as global commodity price fluctuations and exchange rate volatility.

One of the main challenges in implementing inflation targeting in Bangladesh, as highlighted by Hossain, (2020) is the supply-side inflationary pressures that arise from external factors, particularly from food and fuel imports. Since Bangladesh is heavily dependent on imports for essential goods, such as fuel and food, external price fluctuations often result in inflationary pressures that the central bank has limited control over. This makes it difficult for Bangladesh Bank to consistently meet its inflation targets.

Additionally, Rahman, (2017) notes that monetary-fiscal coordination remains a major challenge in Bangladesh. While the central bank adjusts its policy tools to control inflation, expansionary fiscal policies, such as increased government spending on infrastructure projects, can drive inflationary pressures that exceed the central bank's target range. This lack of coordination between fiscal and monetary policies undermines the effectiveness of inflation targeting in the country.

Furthermore, Bangladesh's vulnerability to climate-related disruptions exacerbates inflationary pressures, particularly in the agricultural sector. As Hossain, (2015) points out, the country's agriculture is highly sensitive to extreme weather events, such as floods and droughts, which can disrupt food production and drive up prices. These climate-induced shocks complicate the task of maintaining price stability, particularly for Bangladesh Bank, which is already constrained by external economic factors.

Challenges to Inflation Targeting in Bangladesh

Bangladesh faces several challenges in the effective implementation of inflation targeting:

• External Shocks: As noted above, the country's reliance on imports - particularly food and fuel - makes it highly vulnerable to external price fluctuations. Chowdhury, (2016) argues that inflation targeting is less effective when the central bank has limited control over supply-side inflationary pressures driven by external market dynamics.
• Climate Risks: Bangladesh's vulnerability to climate change further complicates inflation targeting. According to Rahman and Rahman, (2018), extreme weather events can disrupt agricultural production and lead to price increases, particularly for food products. Hossain, (2020) highlights that inflationary pressures caused by climate-related disruptions cannot always be managed using conventional monetary policy tools.
• Institutional Constraints: The institutional capacity of Bangladesh Bank remains a significant challenge. Rahman, (2017) points out that the central bank lacks sufficient tools to manage inflation expectations effectively, particularly in times of external shocks. Moreover, communication strategies and inflation forecasting models are often insufficient, leading to a loss of credibility when inflation deviates significantly from the target.
• Monetary-Fiscal Coordination: The effectiveness of inflation targeting is also hindered by weak coordination between monetary and fiscal policies. Rahman & Rahman, (2018) note that expansionary fiscal policies, particularly government spending on infrastructure, often drive inflation beyond the central bank's target range.

Aim of the Study

The primary aim of this study is to evaluate the effectiveness of inflation targeting within Bangladesh's monetary policy framework. By analyzing the central bank's performance in achieving inflation targets, the study seeks to assess the practical outcomes of the policy and the challenges faced by Bangladesh Bank in maintaining price stability. The study also explores how external shocks, climate risks, and institutional constraints have affected the central bank's ability to implement inflation targeting effectively. The research aims to provide policy recommendations that can help improve the effectiveness of inflation targeting in Bangladesh, considering the unique challenges faced by the country's economy.

Specific Objectives

1. To assess the performance of Bangladesh's inflation targeting framework in reducing inflation volatility and maintaining price stability.
2. To identify the key challenges faced by Bangladesh Bank in implementing inflation targeting, including external shocks, political interference, and climate-induced disruptions.
3. To explore the role of climate risks and external economic factors in influencing the success of inflation targeting in Bangladesh.
4. To provide recommendations for improving the effectiveness of inflation targeting in Bangladesh, considering the country's economic structure and vulnerabilities.

Research Design

This study employs a qualitative research design with an exploratory approach to evaluate the effectiveness of inflation targeting within Bangladesh's monetary policy framework. The qualitative approach is particularly suited for understanding the complexities of inflation targeting in a developing economy, where external factors (such as global commodity price fluctuations, climate risks, and political interference) significantly influence inflation outcomes.

Given the dynamic and multifaceted nature of inflation targeting, particularly in emerging economies like Bangladesh, this research draws on both theoretical and empirical perspectives. The theoretical framework is built upon a review of global inflation targeting models, while the empirical analysis is based on the real-time data from Bangladesh Bank's reports, annual policy statements, and international sources like the World Bank and the International Monetary Fund (IMF). This dual approach allows the study to evaluate the outcomes and limitations of inflation targeting in Bangladesh and the challenges faced by the central bank in maintaining price stability in the face of external shocks and internal challenges. The study aims to explore the effectiveness of the policy measures and how well Bangladesh Bank has adapted its monetary framework to address not only inflation but also the complex environmental and political factors that influence the country's inflation rate.

Study Population

The study population consists primarily of secondary data sources, which include Bangladesh Bank's annual reports, inflation data, interest rates, monetary policy statements, and macroeconomic indicators spanning from 2005 (the year inflation targeting was officially introduced in Bangladesh) to the present. The analysis will focus on how inflation targeting has evolved, its practical implications, and the factors that have hindered or supported its success in achieving inflation stability.

In addition to Bangladesh Bank's data, the study will incorporate macroeconomic data from global financial institutions such as the World Bank and IMF. This will provide international perspectives on inflation trends, commodity prices, exchange rates, and the broader economic conditions that have influenced Bangladesh's inflation outcomes. The inclusion of global data will help contextualize the local challenges faced by Bangladesh Bank, including external economic conditions that could undermine the success of inflation targeting.

Sampling Strategy

This research employs purposive sampling, selecting the most relevant data sources to ensure the study examines only the most pertinent information related to Bangladesh's inflation targeting framework. By focusing on secondary data sources like Bangladesh Bank's reports, annual policy statements, and the inflation data, the study targets high-quality information that directly addresses the research questions. Additionally, data from international organizations, such as the World Bank and the IMF, will be sampled to assess the impact of global commodity price fluctuations, external economic shocks, and macroeconomic conditions on Bangladesh's inflation performance. Peer-reviewed academic papers and policy papers on inflation targeting in developing countries, particularly Bangladesh, will also be included to provide theoretical and empirical perspectives on the challenges of inflation management in similar economies.

Data Collection Methods

The primary data collection method used in this study is document analysis. The research will systematically review key secondary data sources to evaluate the effectiveness of Bangladesh's inflation targeting framework. These sources will include:

1. Bangladesh Bank's Reports: Official documents such as Monetary Policy Statements, annual reports, and policy circulars outlining inflation targeting strategies, policy adjustments, and actual inflation outcomes.
2. World Bank and IMF Reports: These provide crucial country-specific economic data, such as trends in inflation, commodity prices, and macroeconomic stability, as well as analysis of external economic shocks that influence Bangladesh's inflationary pressures.
3. Government Policy Papers: These documents provide insights into fiscal policies that interact with monetary policy and their influence on inflation outcomes.
4. Peer-reviewed Academic Papers: Literature on inflation targeting in emerging economies will be used to compare Bangladesh's inflation targeting policies with other countries facing similar economic and institutional challenges.

This document-centric approach is well-suited for a qualitative study because it focuses on existing institutional data and policy statements that offer direct insights into inflation targeting as a policy framework.

Data Analysis and Tools

The data collected will be analyzed using qualitative analysis techniques, specifically thematic analysis and content analysis. These methods allow for the identification of key themes, trends, and insights from both primary documents and secondary data sources, providing a structured analysis of the effectiveness of inflation targeting in Bangladesh.

• Thematic Analysis: Thematic analysis will identify the key themes that emerge from the review of Bangladesh Bank's reports and policy documents, focusing on the effectiveness of the inflation targeting strategy, the institutional challenges faced by the central bank, and the external factors influencing inflation outcomes. This analysis will help uncover underlying patterns related to the success or failure of the policy in achieving price stability.
• Content Analysis: Content analysis will be used to systematically categorize and quantify specific policy measures, inflation data, and economic indicators outlined in the documents. This technique will be particularly useful for examining the actual outcomes of inflation targeting and assessing whether the goals set by Bangladesh Bank have been met over time.

To supplement these techniques, a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) will also be applied to assess the current state of Bangladesh's inflation targeting framework. This will provide a comprehensive understanding of the institutional capacity, external risks, and opportunities for improving the effectiveness of inflation targeting.

Ethical Issues

This study adheres to ethical research guidelines to ensure the responsible and ethical use of secondary data. As this research involves the analysis of publicly available documents from institutions such as Bangladesh Bank, IMF, and World Bank, ethical concerns related to data collection are minimal. However, the study will ensure that:

• Proper citation of all secondary data sources is maintained, respecting intellectual property rights and acknowledging the original authors.
• Biases in data interpretation are recognized, and efforts are made to present findings that are objective and accurately reflect the data.
• Transparency is maintained throughout the research process to ensure integrity and validity of the findings.

Since the study does not involve human participants, the ethical concerns related to informed consent and confidentiality are not applicable. However, the study will still ensure the responsible interpretation and presentation of all data, avoiding any distortion of results to ensure a truthful reflection of Bangladesh's inflation targeting experience.

This research methodology is designed to effectively evaluate the effectiveness of inflation targeting in Bangladesh's monetary policy framework. By using qualitative data collection techniques such as document analysis, thematic analysis, and SWOT analysis, the study will provide a comprehensive assessment of the current state of inflation targeting, the challenges faced by Bangladesh Bank, and the opportunities for improving the framework to achieve sustainable inflation control. Through the exploratory and qualitative approach, the study aims to deliver actionable insights into the future direction of Bangladesh's inflation targeting policy and its role in shaping the country's monetary policy landscape.

Overview of Inflation Targeting in Bangladesh

Bangladesh's formal adoption of inflation targeting (IT) in 2005 marked a significant shift in its monetary policy framework. Prior to this, inflation was managed through various indirect methods that lacked the transparency and focus on price stability characteristic of IT. The Bangladesh Bank (BB), the country's central bank, set an annual inflation target of 6-7%, signaling a commitment to maintain price stability while fostering economic growth. While the inflation targeting framework has helped to reduce inflation volatility in Bangladesh, its effectiveness in consistently achieving the desired inflation target has been mixed.

This section evaluates the performance of inflation targeting in Bangladesh using empirical data and theoretical insights drawn from the Bangladesh Bank's reports, World Bank and IMF publications, and peer-reviewed research. The findings reveal several key insights into the strengths, weaknesses, and challenges of inflation targeting in Bangladesh's unique economic context.

Effectiveness in Reducing Inflation Volatility

One of the primary objectives of inflation targeting is to reduce inflation volatility and anchor inflation expectations. In this regard, inflation targeting in Bangladesh has had a measurable impact. Since the adoption of the framework, inflation volatility has decreased, particularly when compared to periods prior to 2005. According to the Bangladesh Bank's Annual Reports, the standard deviation of inflation rates in the post-2005 period has been significantly lower than in the pre-2005 period. This is consistent with the findings of Svensson, (1997) who argued that clear and credible inflation targets help stabilize expectations and reduce uncertainty.

However, while inflation volatility has decreased, the central bank has not consistently achieved its inflation target range of 6-7%. Rahman and Rahman, (2018) found that the actual inflation in Bangladesh often deviated significantly from the target, especially during periods of external shocks such as food and fuel price hikes. These deviations are indicative of the vulnerabilities in the inflation targeting framework in emerging markets like Bangladesh, where inflation is heavily influenced by supply-side factors beyond the control of the central bank.

External Shocks and Their Impact on Inflation Targeting

One of the key findings from this study is the extent to which external shocks have disrupted inflation targeting in Bangladesh. As a developing economy that heavily relies on imports, particularly food and energy, Bangladesh is extremely vulnerable to commodity price fluctuations. Chowdhury, (2016) points out that the country's dependence on imports exposes it to global price volatility, which directly impacts inflation. For instance, when global oil prices rise, the cost of transportation and production increases, leading to higher domestic prices for goods and services, thus driving inflation beyond the target range. This finding is consistent with Gonzalez, (2009) who argues that in developing economies, inflation targeting is less effective when external factors, such as global oil price shocks and commodity price fluctuations, play a significant role in driving inflation. In Bangladesh, when global food prices increase or when natural disasters disrupt agricultural production, inflation tends to rise, even if monetary policy is tightened by the central bank.

Additionally, (2017) highlights that exchange rate volatility also plays a significant role in undermining inflation targeting. Since Bangladesh's economy is heavily reliant on imports, fluctuations in the exchange rate can affect the cost of imports, which in turn influences domestic inflation. The central bank's ability to manage inflation is further constrained by its inability to influence global price trends and currency movements, which significantly impact inflation outcomes.

Climate Change and Agriculture: Supply-Side Constraints

Another key finding of this study is the increasing impact of climate-induced disruptions on Bangladesh's inflation dynamics. Hossain, (2020) and Rahman & Rahman, (2018) emphasize that Bangladesh is highly vulnerable to climate change, especially in its agricultural sector. The country's agriculture is directly affected by extreme weather events such as floods, cyclones, and droughts, which can cause significant disruptions in food production. These disruptions lead to food price inflation, which is a significant driver of overall inflation in Bangladesh. The vulnerability of Bangladesh's agricultural sector is a structural challenge that complicates the central bank's ability to meet its inflation targets. Since agriculture accounts for a significant portion of the country's economy, food inflation has a direct impact on overall inflation. Rahman & Rahman, (2018) argue that inflation targeting in Bangladesh must account for these supply-side shocks and climate-related risks that are outside the central bank's control. This suggests that a more flexible approach to inflation targeting, one that incorporates climate risks and external supply-side factors, could improve the effectiveness of the policy.

Monetary-Fiscal Coordination: A Critical Issue

The findings also reveal that monetary-fiscal coordination remains a critical challenge to the success of inflation targeting in Bangladesh. Rahman, (2017) notes that the lack of effective coordination between Bangladesh Bank (the central bank) and the government often leads to conflicting policy objectives. For instance, when the government pursues an expansionary fiscal policy, such as increasing public spending on infrastructure projects, this can lead to increased demand for goods and services, driving inflation up. This lack of coordination is particularly problematic during times of economic crises when the government may increase spending to stimulate economic growth, while the central bank raises interest rates to curb inflation. The result is a conflict between fiscal and monetary policies, which diminishes the effectiveness of inflation targeting.

The weak institutional framework for monetary-fiscal coordination is another important factor that complicates the achievement of inflation targets. Hossain, (2015) discusses how policy misalignment between fiscal and monetary authorities leads to inconsistent efforts in stabilizing prices, particularly when the government's fiscal policies are expansionary and inflationary pressures are building.

Institutional Capacity and Central Bank Independence

The study also identifies significant challenges related to the institutional capacity of Bangladesh Bank. Rahman, (2017) argues that the central bank lacks the necessary tools and models to effectively manage inflation expectations. The absence of a fully developed financial market in Bangladesh and the lack of reliable inflation forecasting models hinder the central bank's ability to predict inflation trends accurately and adjust its policy instruments accordingly. Moreover, political interference remains a persistent issue, as noted by Ahamed, (2016). Political pressures often influence the central bank's decision-making process, particularly during election years or periods of economic crises. Central bank independence is a crucial factor for the success of inflation targeting, and in Bangladesh, political interference undermines the credibility of monetary policy, which can lead to inflationary instability.

In summary, the effectiveness of inflation targeting in Bangladesh has been constrained by multiple internal and external factors. While inflation volatility has decreased since the adoption of inflation targeting, external shocks, climate-related disruptions, and weak fiscal-monetary coordination have hindered the central bank's ability to consistently achieve its inflation target. Furthermore, Bangladesh Bank's institutional capacity and its vulnerability to political interference remain significant challenges to the success of inflation targeting.

To improve the effectiveness of inflation targeting, Bangladesh Bank must enhance its forecasting models, strengthen institutional frameworks, and improve monetary-fiscal coordination. Additionally, integrating climate risks into the inflation targeting framework and adopting more flexible policies to account for supply-side shocks could help stabilize inflation in the face of unpredictable external and environmental factors.

Limitations of the Study

This study is limited by its reliance on secondary data from institutional reports, such as those from Bangladesh Bank, the IMF, and the World Bank. While these sources are credible, they may introduce biases and do not fully capture the complexities of real-time inflation management, particularly during political interference or unanticipated climate disruptions. Additionally, the scope of the analysis is limited to macroeconomic data, which may overlook micro-level factors influencing inflation outcomes. The study also discusses the impact of external shocks and political interference, but these factors are challenging to quantify, limiting the depth of analysis. Furthermore, institutional constraints within Bangladesh Bank are acknowledged but not explored through primary research, such as interviews with central bank officials. Lastly, while climate change's role in inflation is highlighted, the study lacks a detailed examination of specific climate-related events. Future research could address these limitations by incorporating primary data and more comprehensive case studies.

This study has evaluated the effectiveness of inflation targeting in Bangladesh's monetary policy framework, highlighting the key successes, challenges, and areas for improvement. The adoption of inflation targeting by Bangladesh Bank in 2005 marked a significant shift towards a more transparent and predictable monetary policy aimed at reducing inflation volatility and achieving price stability. In general, the inflation targeting framework has helped Bangladesh reduce inflation volatility, providing more clarity for businesses and consumers alike, which has contributed to greater economic stability. However, the study found that the effectiveness of inflation targeting in Bangladesh has been limited by several external and internal factors. While inflation volatility has decreased, the central bank has not consistently met its inflation target of 6-7%, with significant deviations due to external shocks, particularly fluctuations in commodity prices, global inflation trends, and climate-induced disruptions. These external factors, which the central bank has limited control over, have posed significant challenges to the success of inflation targeting in the country.

Additionally, Bangladesh's economic structure, characterized by its dependence on imports, a large informal sector, and a vulnerable agricultural sector, further complicates the effectiveness of inflation targeting. The lack of coordination between fiscal and monetary policies, political interference, and institutional capacity issues within Bangladesh Bank has also undermined the central bank's ability to consistently meet its inflation targets. Furthermore, climate-related risks - such as the impact of extreme weather events on agriculture - have intensified inflationary pressures, especially on food prices. Despite these challenges, the study highlights several key successes of the inflation targeting framework, particularly in reducing inflation volatility. This provides evidence that the inflation targeting framework is a step in the right direction for Bangladesh, but it needs to be adapted to address the unique challenges posed by external shocks, climate change, and institutional constraints.

Recommendations

Based on the findings of this study, the following recommendations are made to improve the effectiveness of inflation targeting in Bangladesh:

Strengthen Monetary-Fiscal Coordination

The lack of coordination between monetary policy and fiscal policy has been identified as a key issue undermining the success of inflation targeting in Bangladesh. When fiscal policies - such as increased government spending on infrastructure projects - are expansionary, they can drive inflation beyond the target range. Improved coordination between Bangladesh Bank and the government is essential to aligning fiscal and monetary objectives, particularly during periods of economic instability. Establishing a clearer communication channel between fiscal authorities and the central bank will help ensure that both policies are complementary rather than conflicting.

Integrate Climate Risks into Inflation Targeting

Climate change poses a growing threat to Bangladesh's economy, particularly in terms of its agricultural sector, which is highly vulnerable to extreme weather events such as floods and droughts. Climate-induced disruptions are a major source of supply-side inflationary pressures, especially on food prices. To enhance the effectiveness of inflation targeting, Bangladesh Bank should integrate climate risks into its monetary policy framework. This could involve incorporating climate risk assessments into inflation forecasts and adopting green monetary policies that address the economic impacts of environmental disruptions.

Improve Institutional Capacity and Data Quality

Bangladesh Bank's institutional capacity has been identified as a significant constraint in the effective implementation of inflation targeting. Strengthening the central bank's forecasting models, particularly for inflation and economic growth, will improve its ability to anticipate inflationary pressures and take timely actions. Moreover, improving data quality and accuracy related to inflation and macroeconomic indicators will help the central bank make more informed decisions. Training central bank staff and investing in better inflation forecasting tools will enhance Bangladesh Bank's ability to implement effective monetary policies.

Enhance Central Bank Independence

Political interference in the central bank's decision-making process is a persistent challenge to the success of inflation targeting in Bangladesh. To ensure the credibility and effectiveness of monetary policy, it is crucial to safeguard the independence of Bangladesh Bank. Ensuring that the central bank operates free from political pressures, especially during election years or economic crises will help maintain the credibility of its monetary policy. This can be achieved by strengthening the legal framework surrounding the central bank's autonomy and ensuring that policy decisions are based on economic data and long-term goals, rather than short-term political considerations.

Adopt Flexible Inflation Targeting Approaches

Given Bangladesh's vulnerability to external shocks and structural challenges, a flexible approach to inflation targeting could improve the central bank's ability to manage inflation more effectively. Rather than strictly adhering to a fixed inflation target, Bangladesh Bank could consider adopting a range-based target with flexibility to adjust in response to external shocks and supply-side disruptions. This would allow the central bank to maintain price stability without being unduly constrained by short-term fluctuations in external factors such as commodity prices and exchange rates.

Develop Green Finance and Sustainable Infrastructure

To mitigate the impact of global commodity price fluctuations and climate-related disruptions, Bangladesh should focus on promoting green finance and investing in sustainable infrastructure. Expanding green refinancing schemes and green bonds would encourage investments in renewable energy and climate-resilient infrastructure, reducing the country's reliance on volatile fossil fuel prices. By creating an environment conducive to sustainable economic growth, Bangladesh can reduce inflationary pressures linked to energy and food imports, which will help stabilize domestic prices.

At first I would like to express my sincere gratitude to the reviewers and academic editor who helped to the to the review process support of this successful research study.

I have declare that there are no potential conflicts of interest to the present study.