Banking and Monetary Crises: Impacts on Exports of MENA Countries

To date, there has been relatively limited literature treating the impact of financial crises on exports. In this paper, we deal with the impacts of financial crises on the exports of goods and the exports of services in the case of MENA countries. We tried to quantify both the level and duration of exports collapse due to monetary and banking crises. Estimating a gravitational model of unilateral trade for the MENA countries over the period 1970-2011, we find that after currency and banking crises in the partner countries, exports of MENA countries decreased significantly by respectively 21% and 28%. This effect persists for 3 years after the date of crises for the banking crises and is viable only one year for the currency crises. The negative impact of banking crises in partner countries is more pronounced in the case of manufactured goods than in total exports, with an average drop of 33% in the year after a banking crisis and remaining 20% below normal after 3 years. However, exports of services of MENA countries are not as adversely affected by financial crises and their behavior can be explained by standard gravity determinants.