A panel data analysis of Bangladesh’s trade: the gravity model approach

Rahman, Mohammad Mafizur (2003) A panel data analysis of Bangladesh’s trade: the gravity model approach. In: 5th Annual Conference of the European Trade Study Group (ETSG2003), 11-13 Sept 2003, Madrid, Spain.

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Attempts are made to provide a theoretical justification for using the gravity model in the analysis of bilateral trade and apply the generalized gravity model to analyse the Bangladesh’s trade with its major trading partners using the panel data estimation technique. We have estimated the gravity model of trade (sum of exports and imports), the gravity model of export and the gravity model of import. Our results show that Bangladesh’s trade is positively determined by the size of the economies, per capita GNP differential of the countries involved and openness of the trading countries. The major
determinants of Bangladesh’s exports are: the exchange rate, partner countries’ total import demand and openness of the Bangladesh economy. All three factors affect the
Bangladesh’s exports positively. The exchange rate, on the other hand, has no effect on the Bangladesh’s import; rather imports are determined by the inflation rates, per capita income differentials and openness of the countries involved in trade. Transportation cost is found a significant factor in influencing Bangladesh’s trade negatively. Also Bangladesh’s imports are found to be influenced to a great extent by the border between
India and Bangladesh. The country specific effects show that Bangladesh would do better by trading more with its neighbouring countries. Multilateral resistance factors affect Bangladesh’s trade and exports positively.

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Item Type: Conference or Workshop Item (Commonwealth Reporting Category E) (Paper)
Refereed: No
Item Status: Live Archive
Additional Information: No evidence of copyright restrictions.
Faculty / Department / School: Historic - Faculty of Business - Department of Economics and Resource Management
Date Deposited: 31 Aug 2010 04:34
Last Modified: 02 Jul 2013 23:28
Uncontrolled Keywords: gravity model, panel data, fixed effect model, Bangladesh’s trade
Fields of Research : 14 Economics > 1402 Applied Economics > 140210 International Economics and International Finance
14 Economics > 1403 Econometrics > 140304 Panel Data Analysis
URI: http://eprints.usq.edu.au/id/eprint/6063

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