Impact of export and import on value addition of ready-made garments sector in Bangladesh

Abstract

Bangladesh has achieved the prestigious second place among the biggest textile exporters countries. The paper's main objective was to explore the relationship between value addition from ready-made garments with export and import from that sector. The study further focused on the influence of previous exports, imports, and value addition on the current value addition. The study was based on three time series variables, namely export, import, and value addition from ready-made garments of Bangladesh, using data from the Bangladesh Central Bank (Bangladesh Bank) for the years 1994 to 2020. The time series variables exhibited the unit root problem and were converted to stationary after the first difference, checked by Augmented Dickey-Fuller (ADF) Test. The multiple linear regression model illustrated, on the one hand, a highly significant and positive relationship between value addition and export, on the other hand, a highly significant and negative relationship between value addition and import for the ready-made garments in Bangladesh. Moreover, the paper used the Vector Autoregression (VAR) model to explore the influences of lag values of those three variables on value addition. The results suggested that causation among the variables was significant in the short run, but insignificant in the long run. In conclusion, Bangladesh's ready-made garment industry plays an important role in the economy, and it is prudent to expand manufacturing with more value addition in the future.