Economic Metamorphosis: Unraveling the Threads of Trade Liberalization in Bangladesh’s GDP Evolution

Details

Supervisors

Vannoorenberghe, Gonzague

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation économétrie, à finalité approfondie

Abstract

This paper aims to examine the effects of trade liberalization on the GDP growth of Bangladesh through exports. Using descriptive analysis of the Economic Complexity Index (ECI) of Bangladesh from the years 2002-2022, we find that the country ranks low in terms of export product sophistication and has a huge dependency on textile and garments exports with very little diversification. The gravity model with multilateral resistance terms analysis using highdimensional fixed effects regression and Poisson Pseudo Maximum Likelihood (PPML) for the period 1980-2022 suggests that there is a statistically significant positive impact of shared colonial history, negative impact of distance and borders, mixed effects of common language and favorable results for the interaction between economic complexity and GDP per capita. It also indicates that Bangladesh mostly exports to larger economies despite huge geographical distances. The OLS regressions using data from time 2000-2022 show that although there is a positive relationship among economic complexity, exports, and GDP growth, the results are not statistically significant, implying that there could be other macroeconomic factors working as a driving force for economic growth in Bangladesh. Since the findings indicate that countries with higher economic complexity gain more from trade, policy recommendations include diversifying exports and increasing economic complexity to foster sustainable economic growth and resilience in Bangladesh.