Responses to Balance of Trade of Bangladesh through the Changes of Influencing Factors (GDP, TOT, FDI, ER, FR): An Econometric Analysis.

This paper aims to show the impacts of exchange rate fluctuation, GDP, Terms of trade, flow of foreign remittance and foreign direct investment on Balance of trade to analyze economic performance of Bangladesh. As an independent nation Bangladesh cannot claim that its BOP figure is satisfactory because since 1971 it’s facing deficit in its Balance of trade. Export is the key to reducing trade deficit.So Trade liberalization could be a remedial instrument to improve its Export figure. Higher currency rate also plays a vital role to make a country’s BOP negative. Though export figure of Bangladesh is somewhat satisfactory, it contains some factors which cause future anxiety. Bangladesh economy is branded worldwide with its high quality RMG products as well as strong manpower supply which bring large amount of remittance to its nations. But some recent political unrest along with geopolitical tensions and barriers continue to put a massive pressure on its BOP performance. The purpose of thispaper is to study the past history of BOP performance of Bangladesh and to draw some suggestions to improve the conditions. This study uses 35 years’ observations of GDP, TOT, FDI, ER and foreign remittance to estimate their impact on Balance of trade. On the basis of the observation, our suggestion isthat Bangladesh should take some initiative to increase products and manpower to enlarge its remittance volume with special consideration to stabilize its political situation