Abstract
The study was conducted at the Department of Economics, University of Chittagong, Bangladesh between December 2010 and April 2011. Balance of payments plays the most important role in a country’s economy. As a developing country, Bangladesh cannot claim that its performances are satisfactory. The objective of this analysis is to develop some ideas about the balance of payments of Bangladesh. It is expected that trade liberalization would promote economic growth from the supply side by leading to a more efficient use of resources. Trade liberalization could lead to faster import growth than export growth and hence the supply side benefits may be offset by the unsustainable balance of payment position. This study uses 36 year observation of GDP, import, export and exchange rate of Bangladesh to estimate their effect on trade balance. Our conclusion is that Bangladesh should relax restrictions on imports more slowly than barriers to exports.
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