A GRAVITY MODEL ANALYSIS OF THE EXPORTS OF BANGLADESH TO AFRICAN REGIONS

Abstract

The objective of the paper is to analyze the bilateral trade between Bangladesh and countries in the African Regions using the Gravity Model approach. For years, Africa has been considered a continent full of opportunities and resources where structural transformations are taking place to integrate African regions into global international trade. At the same time, to achieve competitiveness in international trade, the Government of Bangladesh is looking towards diversifying exports and exploring new markets and regions. Given that, this paper analyses the exports of Bangladesh to 14 top export destinations in the African regions over the last 20 years, spanning 2002-2022, using the gravity model. Besides the general economic size, measured as the trading partners’ real GDP and the distance between the trading partners, the model in the study also considers the exchange rates and per capita GDP of the trading countries. The study employs OLS pooled regression to investigate the determinants. To check for robustness, the study also considers both Time Fixed Effect and Random Effect Regressions. Results indicate that Real GDP and Exchange Rates are positively significant to the exports from Bangladesh, while the distance between the trading partners is not found to have any significance. This implies that the bigger the Bangladesh’s economic size, and the more favorable the exchange rate (appreciations in African currencies), the greater the exports from Bangladesh to these regions. This study can be further conducted with more variables like bilateral trade agreements and geographical and cultural factors to identify if they have any moderating and mediating effects to add to the body of knowledge concerning the countries of interest.

DOI: https://doi.org/10.58964/JBAART04