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Determinants of Trade Balance of Bangladesh: A Dynamic Panel Data Analysis

Author

Listed:
  • KHAN , M. ZAKIR SAADULLAH

    (Associate Professor, Department of Ec onomics, Comilla Univeristy, Bangladesh)

  • HOSSAIN, M. ISMAIL

    (Professor, Department of Economics, Jahangirnagar University, Dhaka, Bangladesh)

Abstract

Under the new perspective of the world economy, the relationship between the determinants and the overall trade balance of a country in conventional models may not necessarily be the same as with bilateral trade balance. This paper develops a new approach to trade balance modeling that captures the effects of the factors suggested by the conventional model and explores the dynamic relationship between variables of the new model. Using recently developed dynamic panel data analysis techniques, the approach is empirically tested for Bangladesh’s trade with its 50 major trading partners for over 26 years and finds the existence of cointegration, that is, stable long-run relationship between variables of the new trade balance model. Short-run dynamics also show convergence, using Unrestricted Error Correction Mechanism (UECM) and Generalized Method of Moments (GMM) estimator.

Suggested Citation

  • Khan , M. Zakir Saadullah & Hossain, M. Ismail, 2012. "Determinants of Trade Balance of Bangladesh: A Dynamic Panel Data Analysis," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 35(2), pages 45-65, June.
    • Handle: RePEc:ris:badest:0536
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    References listed on IDEAS

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    Cited by:

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    2. Linda Akoto & Daniel Sakyi, 2019. "Empirical Analysis of the Determinants of Trade Balance in Post-liberalization Ghana," Foreign Trade Review, , vol. 54(3), pages 177-205, August.
    3. Mejía Méndez, Cinthya & Jáquez Polanco, Jaqueli & Cruz-Rodríguez, Alexis, 2017. "Determinantes del déficit comercial de la República Dominicana [Determinants of the trade deficit of the Dominican Republic]," MPRA Paper 81218, University Library of Munich, Germany.
    4. Gulzar Ali & Ghulam Mustafa & Said Zamin Shah, 2020. "Performance of Agriculture Sector in Foreign Trade of Pakistan," Global Economics Review, Humanity Only, vol. 5(1), pages 12-23, March.
    5. Muzammil, Muhammad, 2020. "A Comparison of Agricultural, Industrial and Services Sector Impact on Trade Balance: A Case Study of Pakistan," MPRA Paper 95750, University Library of Munich, Germany.
    6. Muhammad Shahid Hassan & Ayesha Wajid & Rukhsana Kalim, 2017. "Factors affecting trade deficit in Pakistan, India and Bangladesh," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 34(2), pages 283-304, August.

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    More about this item

    Keywords

    Trade balance; Dynamic panel data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other

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