An Econometric Analysis of the Balance of Payments of Bangladesh

Abstract

Balance of payment plays the most important role in a country’s economy. As a developing country our performances are not satisfactory. The objective of this analysis is to develop some idea about the balance of payments of Bangladesh. Trade liberalization could lead to faster import growth than export growth and hence the supply side benefits may be offset by the unsustainable balance of payment position. This study uses 36 year observation of GDP, import, export and exchange rate of Bangladesh to estimate their effect on trade balance. Our conclusion is that Bangladesh should relax restrictions on imports more slowly than barriers to exports.

Keywords: Trade balance, Export, Import, Terms of trade, GDP, Exchange rates.

JEL Classification: G10