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Sustainability of the current account in Bangladesh: an Intertemporal and cointegration analysis

Author

Listed:
  • Md Abdul Wadud

    (University of Rajshahi, Bangladesh)

  • S. M. Atiar Rahman

    (Institute of Bangladesh Studies, Bangladesh)

  • Mohd. Mozammel Hossain Chowdhury

    (Higher Education Quality Enhancement Project (HEQEP), Bangladesh)

Abstract

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 Bangladeshs current account is sustainable but result of DOLS estimation reveals that it is weakly sustainable.

Suggested Citation

  • Md Abdul Wadud & S. M. Atiar Rahman & Mohd. Mozammel Hossain Chowdhury, 2015. "Sustainability of the current account in Bangladesh: an Intertemporal and cointegration analysis," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(1), pages 353-364, January-M.
    • Handle: RePEc:jda:journl:vol.49:year:2015:issue1:pp:353-364
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    Cited by:

    1. Seema Narayan & Sivagowry Sriananthakumar, 2020. "Are the Current Account Imbalances on a Sustainable Path?," JRFM, MDPI, vol. 13(9), pages 1-24, September.

    More about this item

    Keywords

    Sustainability; Current Account Balance; Cointegration; Dynamic Ordinary Least Square (DOLS) and Bangladesh;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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