Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 Calibrating an Energy Augmented Real Business Cycle (RBC) Model for the Economy of Bangladesh Sakib B. Amin and Shaikh S. Ferdaus Recognising the features and properties of business cycles is of particular significance for developing countries such as Bangladesh. A comprehensive understanding of the fluctuations in economic activity and their causes is essential not only for the policy makers, but also for the market participants. With increasing emphasis on mechanisation and technology in the production process, shocks in energy prices have been often identified as a source of macroeconomic fluctuation (McCallum, 1989). To the best of our knowledge, this is the first study to incorporate energy shocks in the real business cycle model in the context of Bangladesh. This paper simulates 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 replicate long run results and evaluates the extent to which fluctuations of key economic variables like investment, consumption and output are explicated by shocks to factor productivity and energy prices. Furthermore, the paper uses Impulse Response Function (IRF) to examine the model’s ability to describe the dynamic structure of Bangladesh economy. The results of this paper reveal 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 namely: investment, consumption and output, for the case of Bangladesh. Field of Research: Economics ____________________________________________________________________ Dr. Sakib B. Amin, Assistant Professor & Corresponding Author, Department of Economics, North South University, Email: sakib.amin@northsouth.edu Mr. Shaikh S. Ferdaus, Lecturer, Department of Mathematics, Scholastica, Bangladesh, Email: shahnawazf@hotmail.com