Determinants of Trade Balance of Bangladesh Essay

8011 Words Jul 12th, 2015 33 Pages


Mohammad Habib Hossain

A project submitted in partial fulfillment of the requirements for the degree of Professional Master in
Banking and Finance

Examination Committee:

Dr. Donyaprueth Krairit (Chairperson)
Dr. Sundar Venkatesh
Dr. W.A. Wijewardena

Previous Degree:

Bachelor of Business Administration
Khulna University
Khulna, Bangladesh

Scholarship Donor:

Bangladesh Bank

Asian Institute of Technology
School of Management
February 2015

I would like to express my gratitude to my advisor Dr. Sundar Venkatesh, who supported and guided me throughout my research with much patience and empathy. I am
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export and import of goods and services of Bangladesh and to identify the nominal and real macroeconomic determinants for the balance of trade of Bangladesh 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 multiple regression model with the trade balance being the dependent variable and the trade openness, GDP per capita, gross domestic savings, personal remittance received, net flow of external debt, nominal exchange rate and the real exchange rate being the explanatory variables. The study used annual data for 28 years starting from 1986 to 2013. The study finds that trade openness (which is the % share of total international trade in GDP), GDP per capita, gross domestic savings, net flow of external debt, nominal exchange rate and the real exchange rate can explain the movement of trade balance of Bangladesh. Though it does not find personal remittance received as statistically significant to explain the trade balance. Among the independent variables real exchange rate

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