| Author | Hossain, Mohammad Habib |
| Note | A project submitted in partial fulfillment of the requirements for the
degree of Professional Master in
Banking and Finance, School of Management |
| Publisher | Asian Institute of Technology |
| Abstract | The balance of trade or net exports is rather an interesting issue because of its perplexing
relationship and impacts on economies. Bangladesh is a rapidly growing market-based
economy in the South Asian region. It is historically renowned for sustaining a hefty trade
deficit as its imports are much higher than its exports. In spite of the robust average annual
GDP growth of over 5 percent achieved after 90’s, the overall trade deficit is getting bigger
both in absolute figures as well as its percentage contribution to GDP. On June 2014, the
country had a trade deficit of USD 10,830.29 million which is equal to 7.22% of its GDP
and seven and half fold increase from that in 1986. This would induce much concern and
meticulous attention from policy makers working in the central government and the central
bank in the upcoming years. This study broadly attempted to study the development and
trend of the balance of trade components i.e. exports and imports of merchandises by the
economy of Bangladesh and to identify the nominal and real macroeconomic determinants
of the same and to explain their contribution in explaining the volatility of balance of trade.
The study reveals that the export basket of Bangladesh is heavily burdened by the
readymade garments sector which constitutes over 60% of the export proceeds. The import
sector of Bangladesh demonstrates a balanced attitude towards industrial growth and
consumer preference. The intermediated goods represent an average 46% of import values
consumer goods, capital goods, food grains and others. The study developed a standard
multiple regression model where the balance of trade was assumed to be the regressand
variable and the workers’ remittance, foreign direct investment, private consumption of
GDP, and real effective exchange rate (REER) were considered to be the regressor
variables. Annual data of these five variables for 14 years starting from FY 2000-01 to
2013-14 were used for the running the regression model. The study finds that private
consumption of GDP and foreign direct investments significantly explain the movement of
trade balance of Bangladesh. Though it does not find workers’ remittance and REER as
statistically significant for explaining the trade balance. Among the independent variables
private consumption contributes most in explaining the trade balance, followed by foreign
direct investment, workers’ remittance and real effective exchange rate with decreasing
unique contribution towards explaining the trade balance of Bangladesh. |
| Year | 2015 |
| Type | Project |
| School | School of Management (SOM) |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Weerakoon A. Wijewardena; Venkatesh, Sundar ; |
| Examination Committee(s) | Badir, Yuosre
; Donyaprueth Krairit; |
| Scholarship Donor(s) | Bangladesh Bank; |