The Determinants of Bangladesh’s Trade: Evidence from the Generalized Gravity Model

Abstract

The application of the generalized gravity model in analyzing the Bangladesh’s trade reveals that Bangladesh’s trade is positively determined by the size of the economies, per capita GNP differential of the countries involved and openness of the trading countries. Bangladesh’s exports are positively determined by the exchange rate, partner countries’ total import demand and openness of the Bangladesh economy. Bangladesh’s imports are determined by inflation rates, per capita income differentials, openness of the countries involved in trade and the border between India and Bangladesh. Multilateral resistance factors and transportation costs affect Bangladesh’s trade positively and negatively respectively.