Advertisement

Economic Change and Restructuring

, Volume 48, Issue 2, pp 93–117 | Cite as

The effects of exchange-rate volatility on industry trade between the US and Egypt

  • Mohsen Bahmani-OskooeeEmail author
  • Scott W. Hegerty
  • Amr S. Hosny
Article

Abstract

Recent instability in Egypt has brought attention to the role of risk in this important economy. At the same time, there is room in the ever-expanding literature on the link between exchange-rate volatility and trade flows, particularly for individual commodities, in Egypt. This study examines 36 separate export and import industries vis-à-vis the United States, from 1994 to 2007. An application of cointegration analysis and error-correction modeling finds evidence of long-run relationships for many import and export industries, with exports increasing due to higher risk in a large proportion of cases. Although most industries, particularly in imports, are nevertheless unaffected, our results differ from other studies in the literature. An analysis of our industry-level results shows that chemical imports, and exports of industries with large trade shares, are more likely to increase than are other products or imports.

Keywords

Exchange rate volatility Industry data Egypt United States Bounds testing 

JEL Classification

F31 

References

  1. Abu Hatab AR, Shoumann NA, Xuexi H (2012) Exploring Egypt–China bilateral trade: dynamics and prospects. J Econ Stud 39(3):314–326CrossRefGoogle Scholar
  2. Achy L, Sekkat K (2003) The European single currency and MENA’s exports to Europe. Rev Dev Econ 7(4):563–582CrossRefGoogle Scholar
  3. Bahmani-Oskooee M, Hegerty SW (2007) Exchange rate volatility and trade flows: a review article. J Econ Stud 34:211–255CrossRefGoogle Scholar
  4. Bahmani-Oskooee M, Hegerty SW (2009a) The effects of exchange-rate volatility on commodity trade between the US and Mexico. South Econ J 79:1019–1044Google Scholar
  5. Bahmani-Oskooee M, Hegerty SW (2009b) Exchange-rate risk and US-Japan trade: evidence from industry level data. J Jpn Int Econ 22(4):518–534CrossRefGoogle Scholar
  6. Bahmani-Oskooee M, Hegerty SW (2012) Measures of uncertainty in economics. In: Simmons PE, Jordan ST (eds) Economics of innovation, incentives and uncertainty. Nova Science Publishers, New YorkGoogle Scholar
  7. Bahmani-Oskooee M, Hosny AS (2013) Long-run price elasticities and the Marshall–Lerner condition: evidence from Egypt–EU commodity trade. Eur J Dev Res 25:695–713CrossRefGoogle Scholar
  8. Bahmani-Oskooee M, Tanku A (2008) The black market exchange rate versus the official rate in testing PPP: which rate fosters the adjustment process. Econ Lett 99:40–43CrossRefGoogle Scholar
  9. Bahmani-Oskooee M, Economidou C, Goswami GG (2005) How sensitive are Britain’s inpayments and outpayments to the value of the British pound. J Econ Stud 32:455–467CrossRefGoogle Scholar
  10. Bahmani-Oskooee M, Bolhasani M, Hegerty SW (2012a) Exchange-rate volatility and industry trade between Canada and Mexico. J Int Trade Econ Dev 21(3):391–410CrossRefGoogle Scholar
  11. Bahmani-Oskooee M, Harvey H, Hegerty SW (2012b) Exchange-rate volatility and industry trade between the US and Korea. J Econ Dev 37(1):1–25Google Scholar
  12. Bahmani-Oskooee M, Harvey H, Hegerty SW (2012c) Exchange-rate volatility and Sweden’s trade with Germany: evidence from industry data. In: Pedersen ML, Christoffersen J (eds) Nordic countries: economic, political and social issues. Nova Science Publishers, New YorkGoogle Scholar
  13. Bahmani-Oskooee M, Harvey H, Hegerty SW (2013) The effects of exchange-rate volatility on commodity trade between the US and Brazil. N Am J Econ Financ 25:70–93CrossRefGoogle Scholar
  14. Chen S-W, Chen T-C (2012) Untangling the non-linear causal nexus between exchange rates and stock prices: new evidence from the OECD countries. J Econ Stud 39:231–259CrossRefGoogle Scholar
  15. Chowdhury Abdur R (1993) Does exchange rate volatility depress trade flows? Evidence from error-correction models. Rev Econ Stat 75:700–706CrossRefGoogle Scholar
  16. Clark PB (1973) Uncertainty, exchange risk, and the level of international trade. West Econ J 6:302–313Google Scholar
  17. Cushman David O (1992) The effects of real exchange rate risk on international trade. J Int Econ 15:45–63CrossRefGoogle Scholar
  18. Engle RF, Granger CWJ (1987) Co-integration and error-correction: representation, estimation and testing. Econometrica 55:1251–1276Google Scholar
  19. Giorgioni G, Thompson JL (2002) Which volatility? The case of the exports of wheat. Appl Econ Lett 9(4):681–684CrossRefGoogle Scholar
  20. Halicioglu F (2007) The J-curve dynamics of Turkish bilateral trade: a cointegration approach. J Econ Stud 34:103–119CrossRefGoogle Scholar
  21. Kenen Peter B, Rodrik Dani (1986) Measuring and analyzing the effects of short-term volatility in real exchange rates. Rev Econ Stat 68:311–315CrossRefGoogle Scholar
  22. Kulkarni KG (1996) The J-curve hypothesis and currency devaluation: cases of Egypt and Ghana. J Appl Bus Res 12(2):1–8Google Scholar
  23. McKenzie MD (1999) The impact of exchange rate volatility on international trade flows. J Econ Surv 13:71–104CrossRefGoogle Scholar
  24. Mohammadi H, Cak M, Cak D (2008) Wagner’s hypothesis: new evidence from Turkey using the bounds testing approach. J Econ Stud 35:94–106CrossRefGoogle Scholar
  25. Narayan PK, Narayan S, Prasad BC, Prasad A (2007) Export-led growth hypothesis: evidence from Papua New Guinea and Fiji. J Econ Stud 34:341–351CrossRefGoogle Scholar
  26. Perée Eric, Stenherr Alfred (1989) Exchange rate uncertainty and foreign trade. Eur Econ Rev 33:1241–1264CrossRefGoogle Scholar
  27. Pesaran MH, Shin Y, Smith RJ (2001) Bounds testing approaches to the analysis of level relationships. J Appl Econ 16:289–326CrossRefGoogle Scholar
  28. Sauer C, Bohara AK (2001) Exchange rate volatility and exports: regional differences between developing and industrialized countries. Rev Int Econ 9(1):133–152CrossRefGoogle Scholar
  29. Tang TC (2007) Money demand function for Southeast Asian countries: an empirical view from expenditure components. J Econ Stud 34:476–496CrossRefGoogle Scholar
  30. Wong HT (2013) Real exchange rate misalignment and economic growth in Malaysia. J Econ Stud 40:298–313Google Scholar
  31. Wong KN, Tang TC (2008) The effects of exchange rate variability on Malaysia’s disaggregated electrical exports. J Econ Stud 35:154–169CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Mohsen Bahmani-Oskooee
    • 1
    Email author
  • Scott W. Hegerty
    • 2
  • Amr S. Hosny
    • 3
  1. 1.Center for Research on International EconomicsUniversity of Wisconsin-MilwaukeeMilwaukeeUSA
  2. 2.Department of EconomicsNortheastern Illinois UniversityChicagoUSA
  3. 3.International Monetary FundWashingtonUSA

Personalised recommendations