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Trade Flows of Bangladesh: A Gravity Model Approach


Author Info

  • Mili Roy

    (Institute of Statistical Research and Training (ISRT), University of Dhaka)

  • Md. Israt Rayhan

    (Institute of Statistical Research and Training (ISRT), University of Dhaka)

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    This study gives an overview of different methodologies related to gravity model analysis in Bangladesh trade flow. A pooled cross section and time series data were analyzed to incorporate the country specific heterogeneity in country pair trading partners. The trade flows are justified by the basic gravity model since Bangladesh trade is positively significant by the economy size and inversely related to trade barrier. Accordingly, pooled ordinary least square, fixed effect and random effect methods are implied. This study also explores extended gravity model that depicts trade is determined by the gross domestic product, openness of the economy and exchange rate. In addition, cross section results show that regional trade arrangement which is South Asian Association for Regional Co-operation and border are significant for Bangladesh trade.

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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 31 (2011)
    Issue (Month): 1 ()
    Pages: 950-959

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    Handle: RePEc:ebl:ecbull:eb-11-00050

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    Related research

    Keywords: Gravity model; Pooled Ordinary Least Square; Fixed effect; Random effect.;

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    1. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series rwp01-013, Harvard University, John F. Kennedy School of Government.
    2. Simon J. Evenett & Wolfgang Keller, 1996. "On Theories Explaining the Success of the Gravity Equation," International Trade 9608001, EconWPA, revised 13 Jun 1997.
    3. repec:wii:bpaper:bowp:011 is not listed on IDEAS
    4. Hossain, Sharif M., 2009. "South Asian Free Trade Area: Implications for Bangladesh," MPRA Paper 18517, University Library of Munich, Germany.
    5. Hassan, M. Kabir, 2001. "Is SAARC a viable economic block? evidence from gravity model," Journal of Asian Economics, Elsevier, vol. 12(2), pages 263-290.
    6. Edward Christie, 2002. "Potential Trade in Southeast Europe: a Gravity Model Approach," wiiw Working Papers 21, The Vienna Institute for International Economic Studies, wiiw.
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