An Empirical Examination of Bilateral Trade Elasticities: The Case of Bangladesh

Abstract

Bangladesh began implementing a series of trade liberalization reforms in the early 1990s in an attempt to arrest a burgeoning trade deficit, but with little effect. This may be due to trade policies based on aggregate data that ignore the individual responses of Bangladesh's main trading partners. This study estimates the bilateral price and income export and import elasticities for Bangladesh's five major trading partners. The findings indicate that the bilateral elasticity estimates not only vary in magnitude among the countries, but also differ markedly from aggregate elasticity values estimated in previous studies. This suggests that policies should he tailored to trading partners to deliver the intended outcomes.