Short Run and Long Run Associationship between Real Exchange Rate and Trade Balance: Empirical Evidence from Bangladesh (Johansen Approach and Vector Error Correction Model)

Short Run and Long Run Associationship between Real Exchange Rate and Trade Balance: Empirical Evidence from Bangladesh (Johansen Approach and Vector Error Correction Model)

Subroto Dey

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Subrata Saha

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Roksana Akter

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Mawlana Bhashani Science and Technology University

Short Run and Long Run Associationship between Real Exchange Rate and Trade Balance: Empirical Evidence from Bangladesh (Johansen Approach and Vector Error Correction Model)

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Abstract

Several studies have tested the j curve phenomenon for Australia, Japan, South Korea, New Zealand and many other countries using non stationary time series data and have provided mixed results. They not only suffer from the aggregation bias problem but also the spurious regression problem. To overcome this problem, in this paper we investigate the short run and long-run effects of real depreciation of the Bangladeshi taka to the trade balance between Bangladesh and her trading partners. In this article first we check the stationary of data set and find the stationary applying the Augmented Dickey Fuller test, then applying the Johansen co integration test in order to find out the long run co integrated equations and last of all try to investigate the short run and long run relationship among the variables, while we use the VECM (vector error correction model) and found that there is long run associations among the variables, and short-run coefficients are statistically insignificant. But for Bangladesh j curve concept have not been tested yet. That’s why we have chosen this topic, and we incorporated several others variables to test the linkages on trade balance such as GNI as a proxy of GDP, inflation rate, NODA (net officials development assistance, and we have given more priory on the variable real exchange rate.

References

24 Cites in Article

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Subroto Dey. 2019. \u201cShort Run and Long Run Associationship between Real Exchange Rate and Trade Balance: Empirical Evidence from Bangladesh (Johansen Approach and Vector Error Correction Model)\u201d. Global Journal of Human-Social Science - E: Economics GJHSS-E Volume 19 (GJHSS Volume 19 Issue E3): .

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GJHSS Volume 19 Issue E3
Pg. 11- 18

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Journal Specifications

Crossref Journal DOI 10.17406/GJHSS

Print ISSN 0975-587X

e-ISSN 2249-460X

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GJHSS-E Classification: FOR Code: 910299

Submission ReceivedDecember 7, 2018
Peer Review Double Blind
Handling Editor
Accepted January 1, 2019
Published January 15, 2019

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v1.2

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April 30, 2019

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Article Matrices

Total Score: 103

Country: Bangladesh

Subject: Global Journal of Human-Social Science - E: Economics

Authors: Subroto Dey, Subrata Saha, Roksana Akter (PhD/Dr. count: 0)

View Count (all-time): 167

Total Views (Real + Logic): 2923

Total Downloads (simulated): 1395

Publish Date: 2019 04, Tue

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Total Views: 2923

Total Downloads: 1395

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