Issues in Business Management and Economics
Vol.2 (5), pp. 087-093, May 2014
Article ID BM/014/042/ 07 pages
Copyright © 2014 Author(s) retain the copyright of this article. Author(s) agree that this article remain permanently open access under the terms of the Creative Commons Attribution License 3.0 International License
Original Research Article
Determinants of bilateral trade between Bangladesh and the European Union: Approach of gravity model under the panel data
Accepted 8 May, 2014
Md. Hafiz Iqbal*1 and ATM Fakhrul Islam2
1Department of Economics, Government Edward College, Pabna, Bangladesh.
2Department of English, Government Edward College, Pabna, Bangladesh.
*Corresponding Author Email:firstname.lastname@example.org
Tel.: +88 01776 196953.
The EU: the European Union the most important destination of exports from Bangladesh. Bangladesh is likely to face a massive challenge to export more in the market of the EU in recent years. The ban on imports of fishery products (shrimp), limiting infrastructure, supplier performance, well design and less diversified exportable goods, economy and political instability, and non tariff barriers are the major concerns which create the hindrance to uplift the trading performance of Bangladesh with the EU. This paper carried out the panel data set which covers annual exports, imports, real exchange rate, and distance from the years of 1980 to 2010 with balance panel of total (N=465) observations to generate empirically supported assessment, explore the factors that affect free trade between Bangladesh the European Union and recommend an approach for the uplift exports capacity of Bangladesh with the EU. GDP of Bangladesh is positively correlated with trade but GDP of the European Union and bilateral real exchange rate are negatively correlated with trade. Bangladesh and the EU gained benefits from trading with each other. Lower real exchange rate and introduces cost effective, diversified and well designed products can improve exports capacity of Bangladesh with the EU.
Key words: Free trade, Bangladesh and the European union, gravity model, panel data
JEL classification: C33, F10, O24, R12