A Time Series Analysis of Export, Import, and Economic Growth in Bangladesh

Abstract

This is an integrated empirical study of export, import, exchange rate changes, and economic growth of Bangladesh. The study covers the period of thirty two years from 1981 to 2012. Theoretical models of export demand and import demand, on causality analysis between export and growth, and import and growth were carefully chosen and empirically estimated. The question of convergence of export and import in the long run was also formally looked into. The impact of exchange rate changes and economic growth was also thoroughly examined using specific functions. The export demand function showed that the main determinant was income of the importers of our exports. The import demand function provided evidence that our income was the main determinant of our imports. The causality analysis showed that Bangladesh had export-led growth and output-led import. The study of convergence showed that Bangladesh had clear possibility of convergence of export and import in the long run. The study of impact of fall in the external value of money, that is, a rise in exchange rate showed that it affected growth adversely and that this worked in conjunction with other variables like domestic credit, terms of trade, and government expenditure. Several policy suggestions emerged such as Bangladesh should emphasis export to richer countries, pursue a policy of export led growth and should control in increase in exchange rate as far as possible.