The Agricultural and the External (Net Barter) Terms of Trade in Bangladesh: Trends, Movements and Relationships, 1952-2006

This paper analyses the trends and movements of, and the relationship between, the agricultural and the external (net barter) terms of trade in Bangladesh for the period 1952-2006. The Pesaran bounds testing results suggest the presence of a cointegral relationship between the agricultural and the external terms of trade in Bangladesh. The forecasting ability of the error-correction model of the agricultural terms of trade is highly, satisfactory, irrespective of whether the level or the percentage change in the agricultural terms of trade is being forecasted. The overall results suggest that the agricultural terms of trade in Bangladesh is determined endogenously and does not seem to have been deployed by policy makers to ‘squeeze agriculture’ within an import-substituting strategy of development that has effectively ended in this country since the mid-1980s.