Exchange rate and Export of Bangladesh: Does Marshall-Lerner condition holds?


  • Shovon Roy Sheikh Hasina University
  • Jonaed South Asian Network on Economic Modeling



Exchange rate, export earnings, cointegration, VECM, Granger Causality


Export is expected to have a favorable impact on GDP growth, and the exchange rate is expected to have a major impact on export and thus export earnings. The relationship between exchange rate and export is a hotly debated topic in macroeconomics, and the goal of this research is to see if the Marshall-Lerner condition holds incase of Bangladesh that is if devaluation of domestic currency increase export earnings. Explanatory variables of the model in the study are the exchange rate, foreign income (WGDP), and domestic income (DGDP). Cointegration approaches; Error Correction model, Granger Causality test are used in this study to estimate the long and short-run impacts. With time series data from 1973Q3 to 2018Q2, we used the Error Correction Model and the Granger Causality Test. The findings of VECM support short-run exchange rate and export adjustments. The bidirectional causality between exchange rate and export is established using the Granger causality test.


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Author Biographies

Shovon Roy, Sheikh Hasina University

Lecturer, Sheikh Hasina University, Netrokona-2400, Bangladesh

Jonaed, South Asian Network on Economic Modeling

Senior Research Associate, South Asian Network on Economic Modeling, Bangladesh


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How to Cite

Roy, S. ., & Jonaed. (2022). Exchange rate and Export of Bangladesh: Does Marshall-Lerner condition holds?. ABC Research Alert, 10(1), 09–16.



Research Paper