Relationship between Export Revenue and Gross Domestic Product in Bangladesh: An Econometric Analysis

Abstract

Export revenue is an important issue for Bangladesh. So analysis the relationship between export revenue and gross domestic product (GDP) is very crucial for the policy makers to develop our domestic economy as well as to create a good economic relationship with the global economy. The main object of this article is to investigate the relationship between export revenue and GDP in Bangladesh. To test stationary correlogram test is used. In this study, I used Granger causality and co-integration test to test the long-run relationship between GDP and export revenue in Bangladesh from 1981-2015. I found the maximum lag length for the model by using vector autoregressive (VAR) lag order selection criteria. In the model GDP was dependent variable and three variables (Remittance, Foreign direct investment, Export revenue) were the independent variables. In correlogram test, I have seen all of my variables were non-stationary at level, but after taking first difference, they became stationary. According to Granger causality test, there was bidirectional causality from export revenue to GDP in Bangladesh. Johansen co-integration test investigated that there was a long-run equilibrium relationship between export revenue and GDP but by using vector error correction model (VECM) I have seen there is no statistically significant long-run relationship between export revenue and GDP. Wald test indicated a statistically significant short-run relationship between the two variables.