Title: On the nexus between exchange rate volatility and trade flows: panel data evidence from African economies

Authors: Rana Hosni

Addresses: Faculty of Economics and Political Science, Cairo University, 12613, Egypt

Abstract: The current paper explores the relationship between real exchange rate volatility and international trade flows in a sample of 13 African countries over the period from 1993 to 2020. To achieve this purpose, a separate trade equation for both exports and imports flows is examined using dynamic heterogeneous and panel cointegration techniques. Specifically, using the pooled-mean group estimator, the paper finds empirical evidence of a negative and statistically significant impact on exports flows in the long-run. Furthermore, exchange rate volatility is found to have no statistically significant impact on imports flows. Based on these findings, the paper suggests that if African economies want to reap the benefits from further integration into the global market, a careful design of macroeconomic imbalances, pertaining in particular to the trade policies and exchange rate management, should be motivated.

Keywords: exchange rate volatility; trade flows; panel data cointegration models; African countries; GARCH models.

DOI: 10.1504/AAJFA.2025.144752

Afro-Asian Journal of Finance and Accounting, 2025 Vol.15 No.2, pp.175 - 202

Received: 06 Jun 2022
Received in revised form: 10 Feb 2023
Accepted: 20 Feb 2023
Published online: 03 Mar 2025 *

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