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Examining the nexus between exchange rate volatility and export performance: Empirical evidence from the Egyptian experience

Heidi Aly and Rana Hosni

Business and Economic Horizons (BEH), 2018, vol. 14, issue 3, 542-560

Abstract: This paper investigates the relationship between exchange rate volatility and export performance of the Egyptian economy for the period (1980-2016). Moving average standard deviation and conditional standard deviation from GARCH model are used to generate two different measures of exchange rate volatility. The co-integration results indicate the existence of a unique long-run relationship between the real value of non-petroleum exports (as well as the volume of total exports) and the GARCH measure of exchange rate volatility. Using a Vector Error Correction Model, it is found that the volatility of the real effective exchange rate has a significant negative effect on real exports, whereas the effect of the level of real effective exchange rate itself, is not found to be statistically significant. Relevant policy implications are derived from these results.

Keywords: Exchange rate volatility; export; Egypt; GARCH model; error-correction model (search for similar items in EconPapers)
JEL-codes: C13 C22 F31 F41 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:pdc:jrnbeh:v:14:y:2018:i:3:p:542-560

DOI: 10.15208/beh.2018.39

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