Does Globalization Affect the Economic Growth of Bangladesh? - An Econometric Analysis

Abstract

The progressive integration of economies and communities all over the world has been the most spoken of concept in open economics for the last few decades. Globalization has manifold multi-dimensional conjugations on the society, politics, and economics. The paper estimates a model to determine the impacts of globalization on economic growth in Bangladesh. The results, using yearly data from 1986 to 2016, assure long-run relationships among the variables. The study uses the Augmented Dicky-Fuller (ADF) test to check whether a considered data undergoes a unit root problem and it provides a foundation for the long run relationship using the stationary series. Johansen cointegration technique finds a long-run equilibrium relationship between gross domestic product (a proxy of economic growth) and the economic globalization variables. The study also uses the Vector Error Correction Model (VECM) to identify the long run as well as the short run relationships among the considered variables. The paper finds a positive effect of human resource development and trade openness on the economic growth in Bangladesh which is statistically significant in the long run. The paper also finds a negative effect of financial integration and gross fixed capital formation in the long run. The structural stability of the considered model is tested using the CUSUM and CUSUM-SQ test and the findings confirm a long run relationship between the considered variables and the model is structurally stable. Findings do not support the negative effects of globalization on economic growth.