Revisiting Exports, Imports and Economic Growth Nexus: Empirical Evidence from Bangladesh (1981-2017)

Abstract

This study is conducted to revisit the empirical relationship between exports, imports and economic growth in Bangladesh using annual time series data from 1981 to 2017. To capture the objective, the study used Johansen Co-integration test and Granger-causality test in Vector Error Correction Model (VECM) framework. Based on the results of Johansen Co-integration test, it confirms that there is statistically significant long-run equilibrium relationship between exports, imports and economic growth. The results of the VECM Granger Causality test assure that the disequilibrium in long-run GDP growth rate is corrected or adjusted by 24% in short-run following the next year. Furthermore, the study found short-run causality running from exports to economic growth and from economic growth to imports. Finally, findings of the study will help the policy makers and development partners of Bangladesh to rethink about the current policies regarding the exports, imports, inflation, gross capital formation (investment) and economic growth.

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