SUSTAINABILITY OF THE CURRENT ACCOUNT IN BANGLADESH: AN INTERTEMPORAL AND COINTEGRATION ANALYSIS

This paper aims to assess the sustainability of the current account of Bangladesh over the period of 1982-2012 using the intertemporal solvency model of Hakkio and Rush (1991) and Husted (1992). This approach examines the relationship between exports and imports plus unilateral transfer payments. We...

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Bibliographic Details
Published in:The Journal of developing areas 2015-01, Vol.49 (1), p.353-364
Main Authors: Wadud, Md Abdul, Rahman, S. M. Atiar, Chowdhury, Mohd. Mozammel Hossain
Format: Article
Language:English
Subjects:
Analysis
Bangladesh
Budget constraint
Budget constraints
Budget deficits
Cointegration analysis
Consumption
Current account
Current account balance
Current accounts
Developing countries
Economic growth
Economic models
Estimation
Exports
External debt
Foreign exchange rates
GDP
Gross Domestic Product
Imports
International trade
LDCs
Macroeconomics
Payments
Solvency
Studies
Sustainability
Sustainable banking
Sustainable development
Tariffs
Trade deficits
Transfer payments
Transition economies
Willingness to pay
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Summary:This paper aims to assess the sustainability of the current account of Bangladesh over the period of 1982-2012 using the intertemporal solvency model of Hakkio and Rush (1991) and Husted (1992). This approach examines the relationship between exports and imports plus unilateral transfer payments. We apply Johansen cointegration test and Dynamic Ordinary Least Square (DOLS) to evaluate the sustainability. Cointegration between inflows and outflows of current account implies that the intertemporal budget constraint is satisfied. Results of the Johansen cointegration test imply that there is a cointegrating relationship between exports and imports plus unilateral transfer payments. This indicates that Bangladesh's current account is sustainable but result of DOLS estimation reveals that it is weakly sustainable.
ISSN:0022-037X
1548-2278
1548-2278
DOI:10.1353/jda.2015.0019