...DETERMINANTS OF TRADE BALANCE OF BANGLADESH by Mohammad Habib Hossain A project submitted in partial fulfillment of the requirements for the degree of Professional Master in Banking and Finance Examination Committee: Dr. Donyaprueth Krairit (Chairperson) Dr. Sundar Venkatesh Dr. W.A. Wijewardena Nationality: Previous Degree: Bangladeshi Bachelor of Business Administration Khulna University Khulna, Bangladesh Scholarship Donor: Bangladesh Bank Asian Institute of Technology School of Management Thailand February 2015 Acknowledgement I would like to express my gratitude to my advisor Dr. Sundar Venkatesh, who supported and guided me throughout my research with much patience and empathy. I am thankful to the Asian Institute of Technology for arranging a professional master’s program for the working executives. I am much obliged to Bangladesh Bank (Central Bank of Bangladesh) for granting me the scholarship for the entire period of my study. I am also thankful to my colleagues and classmates at PMBF, AIT, especially to Mr. Obaydullah Al Masud and Mr. Golam Rabby Masud, for their support, interest and valuable comments. ii ABSTRACT The balance of trade or net exports is rather an interesting issue because of its perplexing relationship and impacts on economies. Bangladesh is a rapidly growing market-based economy in the South Asian region. It has a long history of sustaining a negative trade balance, importing more goods...
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...Forecast the Trade Balance of Malaysia by Lisawati Indah Binti Osman Faculty of Computer Science & Mathematics UiTM, 40450 Shah Alam, Selangor lisawatiindah178@yahoo.com ABSTRACT The main purpose of this paper is to determine the best fitted model that will perform the forecast best in the case of Malaysia trade balance. The data used in this study is obtained from the Department of Statistics, Malaysia. The inclusion of five appropriate models in this study is purposely to examine the parameter values for comparison for error measures. Models involved are based on the Univariate Modelling Techniques; Naive with Trend Model, Single Exponential Smoothing, Double Exponential Smoothing, Holt’s Method Model and Adaptive Response Rate Exponential Smoothing (ARRES). The best parameter value obtained in this study marked as the main indicator in selecting the best fitted model; indicated by the smallest value of mean square error (MSE and MAPE). Based on the analysis, Adaptive Response Rate Exponential Smoothing (ARRES) model is the most suitable model to forecast the monthly Trade balance for Malaysia. Keywords: Fitted Model, Forecast, Parameter Value, Univariate Modelling Techniques, MSE, MAPE INTRODUCTION The balance of trade is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and consists of exporting more than is imported while a negative balance of trade...
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...“In the context of Bangladesh BOT is more important indicator than BOP” ‘Balance of Payments’ is a term that is used to refer to an accounting record for all the monetary transactions conducted by a country with other countries within a specified period of time. Usually one year. Balance of Payments is actually a numerical summary of all international transactions, and is preferably presented in the country’s domestic currency. In a balance of payments document, exports are recorded as positive items, due to the fact that they earn revenue for the government. Imports and other expenditures are recorded as negative items. The balance between these two is very important, and is perhaps the reason why such a transaction is referred to a balance of payment. In a balance of payments, all the items need to measure up to each other, that is, they should all add up to zero in order for there to be a perfect balance. Even if the country is in a deficit situation, where it is spending more than what it is earning, this deficit ought to be countered by returns from investments, utilizing of reserves, or borrowing of loans either from other sovereign nations or from international financial institutions. In essence a balance of payments is an accounting statement, much like a balance sheet, and should be perfectly balanced for it to qualify as such. Two primary components of a current account are a current account and a capital account. A current account is essentially the recordings...
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...Chapter 03 Balance of Payments True / False Questions 1. Over half of all dollar bills in circulation are held outside American's borders. True False Multiple Choice Questions 2. The current account balance, which is the difference between a country's exports and imports, is a component of the country's GNP. Other components of GNP include A. consumption and investment and government expenditure. B. consumption and government expenditure and net exports. C. consumption and net exports and government expenditure. D. consumption less imports. 3. If the United States imports more than it exports, then this means that A. the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. B. the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus. C. the U.S. dollar would be under pressure to appreciate against other currencies. D. both b) and c) are correct 4. Balance of payments A. is defined as the statistical record of a country's international transactions over a certain period of time presented in the form of a double-entry bookkeeping. B. provides detailed information concerning the demand and supply of a country's currency. C. can be used to evaluate the performance of a country in international economic competition. D. all of the above 5. If a country is grappling with a major balance-of-payment difficulty, it may not be...
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...1. BOP (Balance Of Payment) In economics, the balance of payments, (or BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits). Balance of payments is one of the major indicators of a country's status in international trade, with net capital outflow.[citation needed] The balance, like other accounting statements, is prepared in a single currency, usually the domestic. Foreign assets and flows are valued at the exchange rate of the time of transaction. IMF definition The IMF definition: "Balance of Payments is a statistical statement that summarizes transactions between residents and nonresidents during a period."[1] The balance of payments comprises the current account, the capital account, and the financial account. "Together, these accounts balance in the sense that the sum of the entries is conceptually zero."[1] * The current account consists of the goods and services account, the primary income account and the secondary income account. * The financial account records transactions that involve financial assets and liabilities and that...
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...Chapter : 1 Introduction Bangladesh suffers a huge trade imbalance with India. Apart from the large size of the economy, maintenance of a high protectionist trade regime by India in the forms of tariff and non-tariff barriers have contributed to this imbalance. While Bangladesh has progressed much ahead of India along with its liberalization of trade, India remains slow. Both Bangladesh and India are two major countries of the SAARC and have a long common historical past and similar cultural and social evolution. As far as trade relation is concerned, India is the 2nd largest trading partner of Bangladesh just after USA in 2003. India’s position is at the top for Bangladesh’s imports from the world (IMF: Direction of Trade Statistics, June 2004). Therefore, an analysis of current trade status between the two nations, obstacles and opportunities for mutual trade expansion is very critical for economic development of both countries, especially of Bangladesh, as Bangladesh has been suffering from historical trade deficit with India since its independence. The trade deficit has been increasing exponentially since the recent past. Official data show that compared to 1983, trade deficit in 2003 is more than 46 times higher1 (IMF: Direction of Trade Statistics). This growing deficit is a cause of serious concern for Bangladesh and has important economic and political implications. Hence the importance of the study is realized, and it is expected that the study will help policy makers...
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...Chapter 2 International Flow of Funds Lecture Outline Balance of Payments Current Account Capital and Financial Accounts International Trade Flows Distribution of U.S. Exports and Imports U.S. Balance of Trade Trend International Trade Issues Events That Increase International Trade Trade Friction Factors Affecting International Trade Flows Impact of Inflation Impact of National Income Impact of Government Policies Impact of Exchange Rates Interaction of Factors Correcting a Balance of Trade Deficit Limitations of a Weak Home Currency Solution International Capital Flows Distribution of DFI by U.S. Firms Distribution of DFI in the U.S. Factors Affecting Direct Foreign Investment Factors Affecting International Portfolio Investment Agencies that Facilitate International Flows How Trade Affects an MNC’s Value Chapter Theme This chapter provides an overview of the international environment surrounding MNCs. The chapter is macro-oriented in that it discusses international payments on a country-by-country basis. This macro discussion is useful information for an MNC since the MNC can be affected by changes in a country’s current account and capital account positions. Topics to Stimulate Class Discussion 1. Is a current account deficit something to worry about? 2. If a government...
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...Balance of Trade The balance of trade is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and occurs when value of exports is higher than that of imports; a negative balance of trade is known as a trade deficit or a trade gap. Bangladesh Balance of Trade Bangladesh recorded a trade deficit of 977 USD Million in November of 2012. Balance of Trade in Bangladesh is reported by the Bangladesh Bank.Bangladesh Balance of Trade averaged -1209.67 USD Million reaching an all time high of -56.40 USD Million in August of 2009 and a record low of -5370.60 USD Million in June of 2008. Bangladesh exports mainly ready made garments including knit wear and hosiery (75% of exports revenue). Others include: Shrimps, jute goods (including Carpet), leather goods and tea. Bangladesh main exports partners are United States (23% of total), Germany, United Kingdom, France, Japan and India. Bangladesh imports mostly petroleum product and oil, machinery and parts, soyabean and palm oil, raw cotton, iron and steel and wheat. Bangladesh main imports partners are China (17% of total), India, Indonesia, Singapore and Japan. Along with the growth in exports, the import payments of Bangladesh also showed continuous increase. Export receipts as percent of GDP increased, amidst fluctuations, from 4.0 in 1974-75 to 6.9 in 1984-85, and further to 13.3 in 1994-95. Import payments as percent of the...
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...Examine India’s balance of payments in the last two decades. What have been the trends in terms of merchandise trade, invisibles and capital flows? The balance of payments (BOP) is the method countries use to monitor all international monetary transactions at a specific period of time. Usually, the BOP is calculated every quarter and every calendar year. All trades conducted by both the private and public sectors are accounted for in the BOP in order to determine how much money is going in and out of a country. If a country has received money, this is known as a credit, and, if a country has paid or given money, the transaction is counted as a debit. Theoretically, the BOP should be zero, meaning that assets (credits) and liabilities (debits) should balance. But in practice this is rarely the case and, thus, the BOP can tell the observer if a country has a deficit or a surplus and from which part of the economy the discrepancies are stemming. DIVISION OF BALANCE OF PAYMENTS The BOP is divided into three main categories: the current account, the capital account and the financial account. Within these three categories are sub-divisions, each of which accounts for a different type of international monetary transaction. The Current Account The current account is used to mark the inflow and outflow of goods and services into a country. Earnings on investments, both public and private, are also put into the current account. Within the current account are credits and...
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...Balance of Trade and Balance of Payment with a special reference of Bangladesh Introduction Bangladesh is one of the fastest growing economic countries among the LDC’s country. According to the International Monetary Fund, Bangladesh ranked as the 42rd largest economy in the world in 2011 in PPP terms and 57th largest in nominal terms, among the Next Eleven or N-11 of Goldman Sachs and D-8 economies, with a gross domestic product of US$269.3 billion in PPP terms and US$104.9 billion in nominal terms. The economy has grown at the rate of 6-7% per annum over the past few years. More than half of the GDP is generated by the service sector; while nearly half of Bangladeshis are employed in the agriculture sector. Other goods produced are textiles, jute, fish, vegetables, fruit, leather and leath An easy way to understand any country's economic scenario is through its Balance of Trade (BOT) and Balance of Payment (BOP) figures. Balance of Trade shows the difference between the total amount of incoming and outgoing currencies through import and export. Balance of Payment (BOP) is a summary of economic activities between the residents of a country and the rest of the world during a given period, usually one year. The main purpose of keeping these records is to inform government authorities about the overall international economic position of the country in order to assist them in arriving at decisions on monetary and fiscal policy, on the one hand, and trade and payments policy...
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...Assignment 1: LASA 2 International Trade ECO201 Macroeconomics Instructor: George Williams Completed by: Carleen Wardlow student at Argosy University July 20, 2013 The table below represent U.S. trade balance with China over years (2007-2011): Years: 2007 2008 2009 2010 2011 Export: 62,936,891,576 69,732,837,543 69,496,678,611 91,880,613,079 103,939,433,941 Years: 2007 2008 2009 2010 2011 Import: 321,442,866,934 337,772,627,823 296,373,883,488 364,943,854,151 399,361,922,088 Trade balance with China Years: 2007 2008 2009 2010 2011 (millions of dollars) -258,505,975,358 -268,039,790,280 -226,877,204,877 -273,063,241,072 -295...
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...had appreciated by 57% over these years (average 2002: ¥125.31/$ to average 2011: ¥79.72/$). The paper identifies the significant influence of the movement and concludes how the future trend would be. The details incorporated in this paper was obtained from business magazines, electronic sources, conference papers and journals relating to the foreign exchange, economy and international trade between these countries. Table of Contents Executive Summary ii 1. Introduction 1 2. Period 1-January 2002 – January 2005 a) Economic Climate 2 b) Current Account Balance 3 c) BOJ Intervention 5 3. Period 2-February 2005 – June 2007 a) Monetary Setting - Interest Rate in United States of America 6 b) Carry Trade 7 c) Oil Costs 7 4. Period 3-July 2007 – December 2011 a) Current Account Balance 8 b) Economic Climate 8 c) Carry Trade 9 d) BOJ Intervention 10 e) Natural Disasters 10 5. Conclusion 11...
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...end of 2008 and beginning of 2009. International trade declined right alongside this collapse with the WTO reporting that the global economic crisis sparked a 12.2% fall in the volume of global trade and a 2.5% reduction in world GDP. Economists around the world have come to the consensus that the trade collapse was caused by the contraction of global demand, although there are factors on the supply side that played a role as well. Commodity prices tumbled as the price bubble burst in 2008. This along with shrinking demand sent the value and volume of commodities trade down. The production and exports of manufacturing collapsed as consumers and firms waited out the initial shock of the downturn. This poses the question if the trade drop was demand driven, why was the trade drop so much larger than the GDP drop? Richard Baldwin answers this question by explaining that the demand shock interacted with “compositional” and “synchronicity” effects to heighten the trade-to-GDP ratio. The compositional effect outlines the differences between “postponeable”, consumer durable and investment goods and highlights a special role of postponeable goods in generating volatility of trade flow. Postponeable goods are goods that are produced at the last possible moment or built to order. They occupy a larger portion of the world trade rather than the world GDP. A sudden drop in the demand for postponeables will have a greater effect on world trade but will not change the proportion of world GDP...
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...Balance of payments: The balance of payments of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country during a given period, usually a year. It represents a summation of country's current demand and supply of the claims on foreign currencies and of foreign claims on its currency. These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. Current account:The difference between a nation’s savings and its investment. The current account is an important indicator about an economy's health. It is defined as the sum of the balance of trade, net income from abroad and net current transfers. A positive current account balance indicates that the nation is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower from the rest of the world. A current account surplus increases a nation’s net foreign assets by the amount of the surplus, and a current account deficit decreases it by that amount. The current account and the capital account are the two main components of a nation’s balance of payments. Capital account:In macroeconomics and international...
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...A. Terms of Trade The relative price of exports in terms of imports and is defined as the ratio of export prices to import prices. It can be interpreted as the amount of import goods an economy can purchase per unit of export goods. An improvement of a nation's terms of trade benefits that country in the sense that it can buy more imports for any given level of exports. A deteriorating TOT would mean import prices rise relative to export prices. Lower results generally indicate that there is more money going out of the economy than coming in thus resulting to lower GDP figures. B. Demographic Transition Model Birth and death rates are both low, leading to a total population which is high and stable. Death rates are low for a number of reasons, primarily lower rates of diseases and higher production of food. The birth rate is low because people have more opportunities to choose if they want children; this is made possible by improvements in contraception or women gaining more independence and work opportunities. C. Trade Account The trade balance/ trade account is the amount a country receives for the export of goods and services minus the amount it pays for its imports of goods and services. Current Account The difference between a nation’s savings and its investment. The current account is an important indicator about an economy's health. It is defined as the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current...
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