Nexus Between Exports, Remittances, FDI, and Economic Growth in Bangladesh: A Structural Break ARDL Bounds Test Approach
Abstract:
This study examines the dynamic relationship between exports, remittances, foreign direct investment (FDI), and economic growth in Bangladesh from 1976 to 2019, incorporating structural breaks into the empirical framework. Applying the Autoregressive Distributed Lag (ARDL) bounds testing approach, along with structural break dummies and interaction terms, the analysis identifies a stable long-run cointegrating relationship among the variables. The results demonstrate that both exports and remittances have a significant and positive impact on economic growth, highlighting their central role in sustaining Bangladesh’s development trajectory. By contrast, FDI is found to have a negative association with growth, reflecting persistent structural and institutional constraints that have limited its effectiveness as a driver of growth. The inclusion of a structural break around 2010 captures shifts in the growth process, underscoring the importance of policy reforms and external shocks in shaping macroeconomic outcomes. The findings suggest that Bangladesh’s long-term growth prospects depend on export diversification, productive utilization of remittances, and targeted reforms to attract efficiency-enhancing FDI. These results carry important policy implications as the country navigates post-COVID-19 recovery and external uncertainties such as the Russia–Ukraine war, and seeks to consolidate its transition toward sustainable, export-led economic growth.
Citation:
Mamun, A. (2022). Nexus Between Exports, Remittances, FDI, and Economic Growth in Bangladesh: A Structural Break ARDL Bounds Test Approach. CPER Working Paper Series No. 02. Available at: https://cperbd.org/working-paper/3 or https://ssrn.com/abstract=5421498 or http://dx.doi.org/10.2139/ssrn.5421498
This study examines the dynamic relationship between exports, remittances, foreign direct investment (FDI), and economic growth in Bangladesh from 1976 to 2019, incorporating structural breaks into the empirical framework. Applying the Autoregressive Distributed Lag (ARDL) bounds testing approach, along with structural break dummies and interaction terms, the analysis identifies a stable long-run cointegrating relationship among the variables. The results demonstrate that both exports and remittances have a significant and positive impact on economic growth, highlighting their central role in sustaining Bangladesh’s development trajectory. By contrast, FDI is found to have a negative association with growth, reflecting persistent structural and institutional constraints that have limited its effectiveness as a driver of growth. The inclusion of a structural break around 2010 captures shifts in the growth process, underscoring the importance of policy reforms and external shocks in shaping macroeconomic outcomes. The findings suggest that Bangladesh’s long-term growth prospects depend on export diversification, productive utilization of remittances, and targeted reforms to attract efficiency-enhancing FDI. These results carry important policy implications as the country navigates post-COVID-19 recovery and external uncertainties such as the Russia–Ukraine war, and seeks to consolidate its transition toward sustainable, export-led economic growth.
Mamun, A. (2022). Nexus Between Exports, Remittances, FDI, and Economic Growth in Bangladesh: A Structural Break ARDL Bounds Test Approach. CPER Working Paper Series No. 02. Available at: https://cperbd.org/working-paper/3 or https://ssrn.com/abstract=5421498 or http://dx.doi.org/10.2139/ssrn.5421498