We simulate an energy augmented RBC model for
Bangladesh, characterised by shocks to the Solow residual as
well as energy price. The model in this paper is calibrated
using annual data of 1980-2010 to examine the model’s ability
to describe the dynamic structure of the Bangladesh
economy. To the best of our knowledge, this is the first study
to incorporate energy price shocks in the Real Business Cycle
(RBC) model in the context of Bangladesh. Through the use of
Impulse Response Functions (IRFs) this paper reveals that
while the impact of an upward shock to factor productivity on
all key endogenous variables is in the right direction, an
upward shock in energy prices has an adverse impact on the
key endogenous variables for the case of Bangladesh.
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