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Trade Flows of Bangladesh: A Gravity Model Approach

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Mili Roy & Md. Israt Rayhan, 2011. "Trade Flows of Bangladesh: A Gravity Model Approach," Economics Bulletin, AccessEcon, vol. 31(1), pages 950-959.
  • Handle: RePEc:ebl:ecbull:eb-11-00050
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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I1-P90.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
    3. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 437-466.
    4. Hossain, Sharif M., 2009. "South Asian Free Trade Area: Implications for Bangladesh," MPRA Paper 18517, University Library of Munich, Germany.
    5. Edward Christie, 2001. "Potential Trade in Southeast Europe: A Gravity Model Approach," wiiw Balkan Observatory Working Papers 11, The Vienna Institute for International Economic Studies, wiiw.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Kundu, Nobinkhor, 2015. "Bilateral Trade Balance of Bangladesh with BRICS Countries: A Static Panel Data Analysis," MPRA Paper 66091, University Library of Munich, Germany, revised 03 Aug 2015.
    2. Lotfali Agheli & Unes Salmani & Mir Abdullah Hosseini, 2017. "Factors Affecting Market Share of Iranian Hand-woven Carpet in Singapore," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 500-505.

    More about this item

    Keywords

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

    JEL classification:

    • F1 - International Economics - - Trade
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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