An Empirical Assessment of the Nexus between Terms of Trade and Inflation in Bangladesh

Bangladesh Development Studies, Vol. XLI, Issue 1, pp. 89-105 (2018)

15 Pages Posted: 7 Dec 2018

See all articles by Muntasir Murshed

Muntasir Murshed

Bangladesh Institute of Development Studies (BIDS); Centre for Policy Dialogue; North South University - Department of Economics, Students

Date Written: March 2018

Abstract

Terms of Trade is inextricably linked to the export performance of countries like Bangladesh that have heavily banked on their respective export sector to dictate the overall development drives. Against this backdrop, this paper empirically sheds light on the nexus between terms of trade improvement and the possible inflationary pressures associated in the context of Bangladesh, incorporating annual time series data across 1980 and 2014. This study is of paramount significance for the nation following its journey towards making a graduation to becoming a developing economy whereby the nation would no longer be eligible for the prior preferential trade treatments it previously received being a member of the least developed countries. As a result, betterment of its terms of trade can play a key role in strengthening its export competiveness and escalate its export volumes. In light of the estimated results in this study, an inverted-U shaped non-linear association between terms of trade improvement and inflation is unearthed. Thus, these findings can be a starting point for Bangladesh to adopt relevant export- boosting policies via terms of trade enhancement without the fear of triggering inflationary pressures within the economy.

Keywords: terms of trade, inflation, causality, Bangladesh, India

JEL Classification: F00, F10, F14, F40, E31

Suggested Citation

Murshed, Muntasir, An Empirical Assessment of the Nexus between Terms of Trade and Inflation in Bangladesh (March 2018). Bangladesh Development Studies, Vol. XLI, Issue 1, pp. 89-105 (2018), Available at SSRN: https://ssrn.com/abstract=3282874

Muntasir Murshed (Contact Author)

Bangladesh Institute of Development Studies (BIDS) ( email )

E-17, Agargao, Shere Bangla Nagar
Dhaka, 1207
Bangladesh

Centre for Policy Dialogue ( email )

Dhaka
Bangladesh
+8801674873708 (Phone)

North South University - Department of Economics, Students ( email )

Dhaka 1213, Dhaka 1209
Bangladesh
+8801674873708 (Phone)

HOME PAGE: http://https://www.linkedin.com/in/muntasir-murshed-4b6b46151/

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