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

Bouoiyour, Jamal and Selmi, Refk (2013): Exchange Volatility and Export Performance in Egypt: New Insights from Wavelet Decomposition and Optimal GARCH Model. Forthcoming in: The Journal of International Trade & Economic Development (2014)

Abstract

This paper assesses the link between exchange volatility and exports in Egypt by combining wavelet analysis with an optimal GARCH model chosen among various extensions. The observed outcomes reveal that this relationship is complex and depends then widely to frequency-to-frequency variation and slightly to leverage effect and to switching regime. Indeed, it is well shown that at the low frequency, the coefficient associated to exchange rate volatility’s effect on trade performance is more intense than that at the high frequency and conversely when subtracting energy share from the total of exports. We attribute the apparently conflicting results to the financial speculation, the composition of trade partners and the choice of reference basket’s currencies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Exchange volatility; exports; wavelet decomposition; optimal GARCH model.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; F - International Economics > F1 - Trade; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade

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