Domestic demand, export and economic growth in Bangladesh: A cointegration and VECM approach

Abstract

Using cointegration and error-correction mechanism techniques, this paper investigated the causal relationship between domestic demand, export and economic growth using data pertaining to Bangladesh’s final household consumption and government consumption as a measure of domestic demand, real exports, and real GDP over the period 1971–2011. It is found that final household consumption, final government consumption and export influence short-run and long-run economic growth. Thus, there is a dynamic relationship among domestic demand, export, and economic growth in Bangladesh. Moreover, economic growth in Bangladesh has an impact on its domestic demand and exports in the short-run, but in the long-run economic growth has an impact on final household consumption only.