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The impact of exchange rate volatility on trade integration among North and South Mediterranean countries

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  • Nidal Rashid Sabri
  • Marga Peeters
  • Diama K. Abulaban

Abstract

Timely after the increased exchange rate volatility caused by the global financial crisis, the Arab Spring and European sovereign debt crisis, this article investigates its impact on trade flows. With monthly data from 2000 up to 2011 we estimate by means of a vector auto regression model with eXogenous (VARX) variables the responses of bilateral exports and imports to exchange rate fluctuations between South and North Mediterranean economies. Our results show that the exports of goods from Egypt to the European Union decrease significantly in case of an appreciation of the Egyptian pound vis-à-vis the Euro, while the imports of Egypt from the EU increase to an even larger extent. The same results hold for Morocco, in case of a similar size appreciation of its domestic currency. Jordan is less import-dependent. We conclude that the impact of exchange rate volatility on trade is quite high.

Suggested Citation

  • Nidal Rashid Sabri & Marga Peeters & Diama K. Abulaban, 2012. "The impact of exchange rate volatility on trade integration among North and South Mediterranean countries," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 9(2), pages 107-121.
    • Handle: RePEc:ids:ijbglo:v:9:y:2012:i:2:p:107-121
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    Cited by:

    1. Peeters, Marga & Sabri, Nidal Rachid, 2012. "International financial integration of Mediterranean economies : A bird’s-eye view," MPRA Paper 38081, University Library of Munich, Germany.
    2. Abla El Khawaga & Mona Esam & Rasha Hammam, 2014. "Exchange Rates and Interest Rates: An Empirical Investigation of International Fisher Effect Theory The Case of Egypt (2003-2012)," Working Papers 869, Economic Research Forum, revised Nov 2014.

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    More about this item

    Keywords

    trade integration; international trade flows; exports; imports; Egypt; Jordan; Morocco; exchange rates; exchange rate volatility; international finance; financial integration; European Union.;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages
    • F3 - International Economics - - International Finance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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