Welcome

To
Presentation
 Presentation topic
is
Bilateral Export from Bangladesh to Major
EU Trading Partners: A GLS Approach
PRESENTED BY

Sayda Tahmida
ID No: 14152206004
Intake: 23rd
Program: M.Sc. in Economics
Bangladesh University of Business & Technology
(BUBT)
PROJECT SUPERVISOR

S. M. Woahid Murad
Assistant Professor and Chairman
Department of Economics
Bangladesh University of Business & Technology
(BUBT)
Why I choose the project?

Earlier studies on export and import demand function of

Bangladesh mainly relied on aggregate time-series data,
while some of them considered bilateral time-series as
well as panel data of major trading partners of
Bangladesh. Although, the European Union is the
economic region where Bangladesh exports approximately
half of its total export, there is no separate study on the
export demand function of Bangladesh with the European
Union. Hence, it deserves further study on export demand
function of Bangladesh considering this region. The
present study attempts to remedy this shortcoming.
MAJOR COUNTRIES OF EUROPEAN UNION

1. Austria 1. Ireland
2. Belgium 2. Italy
3. Bulgaria 3. Luxembourg
4. Cyprus 4. Netherlands
5. Czech Republic 5. Poland
6. Denmark 6. Portugal
7. Finland 7. Romania
8. France, 8. Spain
9. Germany 9. Sweden, and
10. Greece 10. United Kingdom.
11. Hungary
 FIGURE 1
MAP OF THE EUROPEAN UNION
 FIGURE 2
EXPORT SHARE (%) OF BANGLADESH TO SOME REGIONAL ECONOMIES

46.19
17.83
1.85
1.81
1.76
0.98
0.67

ASEAN-4 L a ti n A m e r i c a Mi d d l e East B I MS TEC S AAR C N o r t h Am er i c a Eu r o p ean U n i o n

Source: Asian Development Bank (2014)

 LITERATURE REVIEW
Author Period Country Methodology Findings
long-run relationship between
Pesaran bounds test,
real exports, world income and
Hossain (2009) 1963–2005 Indonesia Johansen
the relative export prices in
cointegration tests
Indonesia.
high degree of East West trade
17 Western
integration close to two thirds
Ravishankar European
stochastic frontier of frontier estimates, suggesting
and Stack 1994–2007 countries to the
analysis a low degree of trade
(2013) 10 new member
resistances.
states

there is long run equilibrium

Pesaran cointegration
relationship between demand
test, vector error
Sultan (2012) 1980–2010 India for export, world income and
correction model of
relative price of export and
Granger causality test
trade liberalization.

KPSS Unit Root test,

the sum of export elasticities
Elliott Stock
and import elasticities of the
Rothenberg Unit
real exchange rate exceeds
Root test, Johansen’s
Pandey (2013) 1993–2011 22 countries unity, meaning that the Marshall
cointegration test,
Lerner condition holds for the
vector error
Indian case.
correction model
(VECM).
 Author Period Country Methodology Findings

exchange rate inelastic while income

Ordinary Least Square
Kabir (1988) 1973-1983 Bangladesh elasticity is greater than unity.
(OLS) method

Moniruzzaman 1973-2009 Bangladesh cointegration, Engle- there exists long run relationship
, Toy and Granger causality and among the variables. The error
Hassan (2011) Vector Error Correction correction term is found negative
model which indicates that any short run
disequilibrium will be turned into
equilibrium in the long run.

Murad (2012) 1973-2009 Bangladesh Unit root test, Augmented the Marshall-Lerner condition holds
and its six Dickey-Fuller Test, only in case of the United States
trading Phillips–Perron Test,
partners Johansen Cointegration
Test, Vector Error
Correction Model

Murad (2015) 1977 to Bangladesh Unit Autoregressive Root

2012 with her Tests, Johansen the long run export and import
nineteen Cointegration Tests and elasticities were close to unity among
major Vector Error Correction the six trading partners. Bangladeshi
trading Model exports to Hong Kong and Italy and
partners Bangladeshi imports from Italy,
Netherlands, South Korea, Spain and
UK provide evidence of the stability of
equilibrium relationships in the short
run.
 Methodology

The GLS model

 DATA SOURCE

• The panel data set consists of Bangladesh export flows from major 21
European Union all panel data are yearly for the period 1973 to 2014. The data
sources are as follows: the statistical data export receipts and import payments
collect the data from Bangladesh Bank. Key Indicators for Asia and the Pacific,
published by Asian Development Bank. Data on GDP and GDP per capita at
constant 2005 US dollars are from the World Development Indicators (WDI),
published by the World Bank. The geographic distance, measured in kilometres
between the economic centers of the trading partner countries, are from the
CEPII as are the colonial, area and the landlocked dummies. Nominal exchange
rates are official exchange rates in local currency units (LCU) per US dollar,
sourced from the WDI, World Bank. The exchange rates for each country that
adopted the euro were chain linked with the euro exchange rate upon entry into
the European Monetary Union (EMU) and International Financial Statistics of
the International Monetary Fund, CD- ROM.
 TABLE 1
FROM BANGLADESH TO EUROPEAN UNION EXPORT
DETERMINANTS (RANDOM-EFFECTS GLS REGRESSION)

Dependent Variable: LnExport

Independent
Coefficient Standard Error Z – value P – value
Variables
LnGDPPC 6.56*** 0.18 36.54 0.000
LnArea 1.65*** 0.31 5.37 0.000
LnS -0.138*** 0.03 -4.87 0.000
Landlocked -0.17 1.03 -0.17 0.868

LnDistance_Capital -9.91*** 3.17 -3.13 0.002

Constant 24 27.91 0.86 0.390

Note: Using GLS method for panel data instead of OLS method, *** denotes the null hypothesis rejected at
1% significance level, and also P-value indicates the statistically significant and statistically insignificant.
 RESULT
 The LnGDPPC shows the positive relationship
with export and the statistically significant at
1% significance level and income elasticity of
export is elastic for Bangladesh.
 The positive coefficient of area enhances the
trade volume and it is statically significant at
1% significance level. That means larger
countries trade more.
 RESULT
 The spot rate shows the negative relation with
export and the coefficient is statistically significant at
1% significance level. In this case, depreciation of
Bangladeshi taka against the foreign currencies does
not lead to higher export earnings. Therefore,
frequent depreciation of currency is not advisable
for Bangladesh to enhance its export earnings.
 The sign of the landlocked of export is negative and
it is statistically insignificant and it adversely affects
the export of Bangladesh.
 RESULT
 LnDistance_Capital shows the negative relation with
export and the null hypothesis is rejected by the p-
value that is the statistically significant at 1%
significance level. This negative cofficinet of
distance shows the more distance of one country’s
from another country that is raised the
transportation cost and it will decrease volume of
trade and it adversely affect on export of
Bangladesh. Distance capital is important
ingredients of determinant volume of export.
 CONCLUSION AND
RECOMMENDATION
This paper estimates on the bilateral export from
Bangladesh to European Union by using GLS approach
over 1972 to 2014. In addition, our findings suggest
that the growth of per capita GDP and the total area of
the member states of the European Union positively
affect the export earnings of Bangladesh i.e., as the
land size of a country increases - ceteris paribus– the
export of Bangladesh also increase. Moreover, the
depreciation of Bangladeshi taka decreases the exports
of Bangladesh to the trading partners of EU member
countries.
 CONCLUSION AND
RECOMMENDATION
Therefore, frequent depreciation of currency is not
advisable for Bangladesh to enhance its export earnings.
Analogously, the distance adversely affects the export
because the more distance from one country to another
higher the transportation cost and it leads to lower export.
Likewise, landlocked also adversely affects the export of
Bangladesh.
The government of Bangladesh careful attention should be
given towards the foreign exchange rate and improved of
the transportation system to remove the higher cost of
export and decrease the lead time of export.
Thank You