Impact of Exchange Rate Depreciation on Export of Bangladesh: An ARDL (Autoregressive Distributed Lag) Model
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Date
2007-08
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
CRP, International Islamic University Chittagong
Abstract
This paper is to examine the impact of depreciation of
exchange rate on export of Bangladesh. An Autoregressive
Distributed Lag Model (having lags of both dependent and independent variables) has been used to test this. From the analysis
it has been found that depreciation at some lags has positive impact
on export. But current-period depreciation has negative impact on
export (this result goes with the findings of Fang. Lai, Miller. 2005
& Fang. Miller. 2004 where they showed that too much fluctuation
in exchange rate might have offset the growth in export generated by depreciation). However. both the relations are statistically
significant. These findings somehow go with the celebrated .l-curve effect which points out deterioration before an improvement in a country's trade balance resulting from a depreciation or devaluation. So in Bangladesh depreciation might not be a correct choice ifwe want to increase export within a short span of time. This analysis also shows that the income of the consumers of our
exportable does not have significant effect on our export i.e. our
export is income inelastic.
Description
Business Review Vol-2, Article-2, August 2007 (Page-25-46)
Keywords
Exchange Rate Depreciation, Export, ARDL, Foreigners' Income.