Volume 50 (2025)

Economic Sociology: Impact of Foreign Debt, Remittances, Trade Balance, Exchange Rate, and FDI on Bangladesh’s Foreign Exchange Reserves

(Pages 127-145)

Author(s)

Md. Aminul Islam1, Md. Mahmudul Hassan2, Mst. Amina Khatun2 and Farha Sultana3
1Department of Economics, Netrokona University, Netrokona, Bangladesh; 2Department of Economics, Bangladesh University of Business and Technology (BUBT); 3Department of Management, Rangamati Science and Technology University

DOI: https://doi.org/10.65767/0278-839X.2025.50.13
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Abstract:
This study investigates the determinants of Bangladesh’s foreign exchange reserves (1976–2024), focusing on trade balance, external debt, remittances, FDI, and exchange rates. Employing time-series econometrics, we conduct stationarity tests (ADF), cointegration analysis (Johansen), and Granger causality tests. Key findings reveal that remittances, foreign debt, and trade balance positively influence reserves, while exchange rates exhibit a negative impact, and FDI shows negligible effects. Vector Error Correction Modeling (VECM) highlights equilibrium adjustments in exchange rates, remittances, and debt, whereas trade balance and reserves display weak long-term convergence. Bidirectional causality emerges between remittances and exchange rates, and impulse response analysis underscores the persistent effects of trade balance shocks. The paper concludes with policy recommendations to enhance reserve stability.

Keywords:
Foreign exchange reserves, remittances, Economic sociology, external debt, FDI, exchange rates, trade deficit, Bangladesh.

JEL Classifications: F31, F32, F41, C32.

Cite this paper:

Md. Aminul Islam, Md. Mahmudul Hassan, Mst. Amina Khatun and Farha Sultana, Economic Sociology: Impact of Foreign Debt, Remittances, Trade Balance, Exchange Rate, and FDI on Bangladesh’s Foreign Exchange Reserves, The Journal of Social, Political and Economic Studies. Volume 50, Year 2025 | PP. 127-145. https://thejspes.com/vol50-a13

© 2025 The Author(s). Published by 'The Journal of Social, Political and Economic Studies'.


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