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How do the terms of trade influence economic growth? Empirical evidence from Bangladesh

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  • Md. Gias Uddin Khan
  • Mohammad Abdul Hannan Pradhan

Abstract

The terms of trade reflect the gain from international trading through its link with different stylised factors. However, maintaining proper terms of trade is one of the prime challenges for least developed and developing countries as this may hurt the growth performance. This paper analyses how the terms of trade impact the economic growth of Bangladesh utilising the yearly time series data throughout the time of 1981 to 2018. The autoregressive distributed lag (ARDL) bounds testing approach corroborates the existence of cointegration between economic growth and terms of trade. The results uncover that the terms of trade significantly affect economic growth in an opposite direction throughout the sample period in both the short-run and long-run. Moreover, labour influences economic growth in the long-run only. The capital, however, does not have any short-run and long-run influences on the GDP growth for Bangladesh.

Suggested Citation

  • Md. Gias Uddin Khan & Mohammad Abdul Hannan Pradhan, 2022. "How do the terms of trade influence economic growth? Empirical evidence from Bangladesh," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 14(3), pages 254-268.
    • Handle: RePEc:ids:ijsuse:v:14:y:2022:i:3:p:254-268
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