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Determinants of Trade Balance of Bangladesh: A Dynamic Panel Data Analysis

M. Zakir Saadullah Khan and M. Ismail Hossain
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M. Zakir Saadullah Khan: Associate Professor, Department of Ec onomics, Comilla Univeristy, Bangladesh
M. Ismail Hossain: Professor, Department of Economics, Jahangirnagar University, Dhaka, Bangladesh

Bangladesh Development Studies, 2012, vol. 35, issue 2, 45-65

Abstract: Under the new perspective of the world economy, the relationship between the determinants and the overall trade balance of a country in conventional models may not necessarily be the same as with bilateral trade balance. This paper develops a new approach to trade balance modeling that captures the effects of the factors suggested by the conventional model and explores the dynamic relationship between variables of the new model. Using recently developed dynamic panel data analysis techniques, the approach is empirically tested for Bangladesh’s trade with its 50 major trading partners for over 26 years and finds the existence of cointegration, that is, stable long-run relationship between variables of the new trade balance model. Short-run dynamics also show convergence, using Unrestricted Error Correction Mechanism (UECM) and Generalized Method of Moments (GMM) estimator.

Keywords: Trade balance; Dynamic panel data (search for similar items in EconPapers)
JEL-codes: C23 F49 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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