Does Exchange Rate Volatility Affect Foreign Trade? The Empirical Evidence from Some Selected MENA Countries

Abstract

 The study examines empirically the effect of the exchange rate volatility on foreign trade of eight (08) selected MENA countries from 1988-2022. For the reliability of the findings, the study applied the Panel ARDL/PMG technique, as well as the Robust Least-Squares and Fixed-Effect approaches. In addition, the Heterogeneous Panel Granger Causality test by Dumitrescu and Hurlin (2012) is utilized to determine causal relationships between the variables. The results indicate that exchange rate volatility has a significant and positive effect on the export demand, and while negative and significant effect on the import demand of MENA Countries. Overall, the study findings imply that policies focused on obtaining and preserving a stable competitive real exchange rate might further improve these nations' exporting activities.