ISSN 2286-4822, www.euacademic.org
IMPACT FACTOR: 0.485 (GIF)
Bangladesh’s Balance of Payments:
an Econometric Analysis
M. S. RAHMAN CHOWDHURY
Department of Economics
Jatiya Kabi Kazi Nazrul Islam University
The study was conducted at the Department of Economics,
University of Chittagong, Bangladesh between December 2010 and April 2011. Balance of payments plays the most important role in a country’s economy. As a developing country, Bangladesh cannot claim that its performances are satisfactory. The objective of this analysis is to develop some ideas about the balance of payments of Bangladesh. It is expected that trade liberalization would promote economic growth from the supply side by leading to a more efficient use of resources. 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.
Key words: trade balance, export, import, terms of trade, GDP
Balance of payment is a statistical statement designed
to provide, for a specific period of time, a systematic record of an economy‟s transactions with the rest of the world. Its major components are the current account and the financial account. The spending of foreign currency is debit and it is a negative item. If a transaction earns foreign exchange for the nation, it is 337
M.S.Rahman Chowdhury – Bangladesh’s Balance of Payments: an Econometric Analysis
recorded as a plus item and it is a credit. Generally speaking, imports are debits and exports are credit.
If credits are more, i.e. exports are more, than it is a
positive sign for...