Trade Liberalization in Bangladesh: The Process and Its Impact on Macro Variables Particularly Export Expansion

Abstract

This paper examines the process of Bangladesh's trade liberalization and its impact on the growth and structure of exports, imports, GDP and other relevant macroeconomic variables with particular emphasis on exports. It also provides an updated account of the various structural adjustment programs undertaken in Bangladesh including trade, fiscal, industrial and financial reforms, and explains how these reforms supplemented one another to promote greater market and export orientation. Various Indicators of trade liberalization show a substantial shift of the Bangladesh external trade regime and the resultant reduction in anti-export bias. Spearheaded by textiles and readymade garments, both total- and manufacturing exports consistently grew over the post-liberalization period. Real GDP also registered a steady growth during the post-liberalization period, particularly during the 1990s. An empirical investigation based on a distributed lag modeling and cointegration suggests that both anti-export bias reduction and import-GDP ratio, the latter being a proxy for imported capital, have significantly impacted on exports in the long-term.