Monetary vs Fiscal Dominance

Monetary policy and fiscal policy are a country's two main economic tools. When one dominates the other, it's called 'dominance.'

Under monetary dominance, the central bank (like Bangladesh Bank) independently conducts monetary policy, and the government adjusts its fiscal policy accordingly. This generally keeps inflation under control.

Under fiscal dominance, the government's fiscal policy (high debt and deficits) forces the central bank to accommodate its spending. The central bank may be compelled to monetize government debt, which fuels inflation.