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

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  • Bouoiyour, Jamal
  • Selmi, Refk

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.

Suggested Citation

  • Bouoiyour, Jamal & Selmi, Refk, 2014. "Exchange Uncertainty and Export Performance in Egypt: New Insights from Wavelet Decomposition and Optimal GARCH Model," MPRA Paper 59568, University Library of Munich, Germany, revised 2014.
  • Handle: RePEc:pra:mprapa:59568
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    File URL: https://mpra.ub.uni-muenchen.de/59568/1/MPRA_paper_59568.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange volatility; exports; wavelet decomposition; optimal GARCH model; Egypt.;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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