Authors :
Mohammad Anamul Huq
Volume/Issue :
Volume 9 - 2024, Issue 12 - December
Google Scholar :
https://tinyurl.com/ymz4xa7y
Scribd :
https://tinyurl.com/4mc6t282
DOI :
https://doi.org/10.5281/zenodo.14591128
Abstract :
This paper examines the relationship between
currency devaluation and export performance in
Bangladesh, focusing on the role of broader
macroeconomic factors. While devaluation theoretically
enhances export competitiveness by lowering relative
prices in international markets, its actual effects in
Bangladesh reveal a context-dependent relationship. This
study investigates the moderating impact of variables
such as interest rate, inflation, government expenditure,
foreign direct investment (FDI), and trade indices, along
with sector-specific dynamics in garments,
pharmaceuticals, leather, and jute.
Using the Synthetic Control Method (SCM)
complemented by regression analysis, this research
compares Bangladesh’s export trends against synthetic
benchmarks and regional comparators such as India and
Bhutan over the period 1991 to 2020. Regression analysis
shows that devaluation has a positive but modest effect,
with a coefficient of 0.0780833, while broader variables
like government expenditure and export value index
exhibit positive associations with export performance.
Conversely, SCM analysis highlights negative gaps
between Bangladesh’s actual export performance and its
synthetic counterpart, often indicating
underperformance due to policy misalignment and
economic shocks. The final government consumption
expenditure, for instance, demonstrates a significant
negative impact, reflecting structural challenges in trade
competitiveness.
Analysis of beyond-devaluation factors underscores
their crucial role in shaping export outcomes. Positive
contributions from export indices and government
expenditure highlight the importance of value addition
and strategic public investment. However, negative trends
associated with FDI and import dependency reveal
persistent structural inefficiencies. Sectoral insights show
that while the garments industry benefits from labor cost
advantages, it faces input dependencies that limit its
gains. Pharmaceuticals and leather require substantial
technological and regulatory support, while jute
demonstrates greater resilience due to lower import
reliance.
The findings conclude that devaluation alone cannot
drive sustainable export growth. Its impact is intertwined
with broader structural, fiscal, and trade-specific variables, necessitating an integrated approach.
Recommendations include fostering FDI, enhancing
governance, upgrading infrastructure, and promoting
innovation to create a resilient and competitive export
sector. By embedding devaluation within a
comprehensive policy framework, Bangladesh can better
address its export challenges and achieve inclusive and
sustainable economic growth.
Keywords :
Currency Devaluation, Export Performance, Beyond-Devaluation Factors, Synthetic Control Method, Regression Analysis, Sectoral Insights, Macroeconomic Stability.
References :
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This paper examines the relationship between
currency devaluation and export performance in
Bangladesh, focusing on the role of broader
macroeconomic factors. While devaluation theoretically
enhances export competitiveness by lowering relative
prices in international markets, its actual effects in
Bangladesh reveal a context-dependent relationship. This
study investigates the moderating impact of variables
such as interest rate, inflation, government expenditure,
foreign direct investment (FDI), and trade indices, along
with sector-specific dynamics in garments,
pharmaceuticals, leather, and jute.
Using the Synthetic Control Method (SCM)
complemented by regression analysis, this research
compares Bangladesh’s export trends against synthetic
benchmarks and regional comparators such as India and
Bhutan over the period 1991 to 2020. Regression analysis
shows that devaluation has a positive but modest effect,
with a coefficient of 0.0780833, while broader variables
like government expenditure and export value index
exhibit positive associations with export performance.
Conversely, SCM analysis highlights negative gaps
between Bangladesh’s actual export performance and its
synthetic counterpart, often indicating
underperformance due to policy misalignment and
economic shocks. The final government consumption
expenditure, for instance, demonstrates a significant
negative impact, reflecting structural challenges in trade
competitiveness.
Analysis of beyond-devaluation factors underscores
their crucial role in shaping export outcomes. Positive
contributions from export indices and government
expenditure highlight the importance of value addition
and strategic public investment. However, negative trends
associated with FDI and import dependency reveal
persistent structural inefficiencies. Sectoral insights show
that while the garments industry benefits from labor cost
advantages, it faces input dependencies that limit its
gains. Pharmaceuticals and leather require substantial
technological and regulatory support, while jute
demonstrates greater resilience due to lower import
reliance.
The findings conclude that devaluation alone cannot
drive sustainable export growth. Its impact is intertwined
with broader structural, fiscal, and trade-specific variables, necessitating an integrated approach.
Recommendations include fostering FDI, enhancing
governance, upgrading infrastructure, and promoting
innovation to create a resilient and competitive export
sector. By embedding devaluation within a
comprehensive policy framework, Bangladesh can better
address its export challenges and achieve inclusive and
sustainable economic growth.
Keywords :
Currency Devaluation, Export Performance, Beyond-Devaluation Factors, Synthetic Control Method, Regression Analysis, Sectoral Insights, Macroeconomic Stability.