Exchange Uncertainty and Export Performance in Egypt: New Insights from Wavelet Decomposition and Optimal GARCH Model

Jamal Bouoiyour () and Refk Selmi

MPRA Paper from University Library of Munich, Germany

Abstract: To effectively assess the link between exchange rate uncertainty and exports performance in Egypt, this article relies on an optimal GARCH model among decomposed series on a scale-by-scale basis via wavelet approach. The observed outcomes reveal that the focal connection depends substantially on the frequency-to-frequency variation and slightly on the leverage effect. Indeed, the effect of exchange rate volatility on trade appears stronger at higher frequencies (i.e., the short-run). When subtracting energy’s share, the results change remarkably. Accurately, the studied relationship becomes more important at lower frequencies (i.e., the long-run). The first findings may be due to the fact that the energy market is mainly driven by a great speculation, coupled with the absence of efficient anti-cyclical fiscal policy and insufficient financial development. We attribute the second ones to the composition of trade partners, the choice of a reference basket’s currencies, the specialization in products with low technological content, the lack of innovative capacity and the weakness of institutions.

Keywords: Exchange volatility; exports; wavelet decomposition; optimal GARCH model; Egypt. (search for similar items in EconPapers)
JEL-codes: C1 F1 F14 (search for similar items in EconPapers)
Date: 2014, Revised 2014
New Economics Papers: this item is included in nep-ara
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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