BANGLADESH INSTITUTE OF INTERNATIONAL AND STRATEGIC STUDIES

EXPORT POTENTIAL OF BANGLADESH IN BIMSTEC FREE TRADE AREA: EVIDENCE FROM GRAVITY MODEL

Author: Ishtiaque Selim

DOI Link: https://www.doi.org/10.56888/BIISSj2014v35n3a1

ABSTRACT

Bangladesh has been striving hard to exploit SAFTA for boosting its trade and economic relations with the South Asian neighbours. But this free trade agreement is yet to bring sufficient dividends for Bangladesh. While the role of regional integration in the development process is undeniable, the slow progress of SAFTA in South Asia is a source of frustration for a developing nation like Bangladesh. Accordingly, in an effort to yield trade and economic gains, Bangladesh has become a member of BIMSTEC-FTA. This article uses augmented gravity equation to estimate Bangladesh’s export potentials in BIMSTEC-FTA. It estimates an export equation for Bangladesh taking some relevant variables into account. Also, the model undergoes some diagnostic tests. On the basis of the tests the model is cleared of multicollinearity and heteroscedasticity problems. The results from the estimations show that Bangladesh has export potentials in BIMSTEC-FTA. Therefore, the country’s economy might take advantages from boosting exports to developing economies of BIMSTEC, namely, India and Thailand.