The factors affecting Bangladesh's exports: evidence from the gravity model analysis

Abstract

This paper attempts to identify the factors that affect Bangladesh's exports. The panel data estimation technique and a generalized gravity model have been used to analyze Bangladesh's export trade pattern. A theoretical justification for using the gravity model in the analysis of bilateral trade has been reaffirmed. The estimated results reveal that the main contributors to Bangladesh's exports are the exchange rate, partner countries' total import demand and the openness of the Bangladesh economy. All these factors affect the country's exports positively. Transportation costs have negative but insignificant effect on Bangladesh's exports. The country specific effects show that neighboring countries' influence on the Bangladesh's exports is more than the influence of other distant countries. Therefore, Bangladesh should reduce trade barriers, pursue competitive devaluation of its currency, improve product quality and increase product varieties.