Bilateral trade through official channel between India and Bangladesh: An analysis with the use of time series forecasting models

Statistical Economic and Social Research and. All rights reserved.Bilateral trade between India and Bangladesh will be mutually beneficial to both the countries and improve welfare as per trade theory. This study has tried to forecast impact of trade between two countries considering the time period 1991-2014.The researchers compared Autoregressive Moving Average (ARMA) and Autoregressive Integrated Moving Average Model (ARIMA) after testing the significance of Augmented Dicky fuller model’s intercept of explanatory variables.While using ARIMA model the study found that best-fit estimates were exports to India. However, forecasting indicates that import from India to Bangladesh also had a positive impact over the time period 1991-2014.By engaging in bilateral trade with India, Bangladeshi producers and suppliers ought to be concerned about attaining long term sustainability in their business, by improving quality of the products so that export can be raised in a competitive manner. Market access to India will be beneficial only with having competitive advantage, in bilateral trade. To export products, India should allow duty free access to certain products from Bangladesh in which it has competitive advantage. To maintain Pareto optimality in the bilateral trade, Bangladesh should import products from India at competitive prices. This will help to promote and nurture bilateral trade relations, ensure sustainability of business and mutually benefit both the countries through free trade agreement. © 2016