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Real Exchange Rate and Manufacturing Export Competitiveness in Eastern Africa

Author

Listed:
  • Bogale Hunegnaw, Fetene

    (Adama Science and Technology University)

Abstract

This paper investigates the effects of real exchange rates on manufacturing exports in 10 East African countries. The study uses pooled mean group and mean group estimators with an Autoregressive Distributed Lag procedure to analyze disaggregated manufacturing exports, unlike past studies that often examined aggregate exports by adopting traditional empirical methods subject to various shortcomings. Our results are more or less consistent with the standard theory. The elasticity is relatively low, except for low-skill manufacturing exports. In the short run, real exchange rate depreciation improves exports of labor-intensive, low-skill, and medium-skill technology-intensive manufacturing. In contrast, depreciation of the real effective exchange rate worsens high-skill technology-intensive exports. Another findings suggest that exchange rate devaluation matters for export performance in Eastern Africa. Nevertheless, the magnitude of this elasticity is low and remains below the findings for Sub-Saharan African and other developing countries. Positive and elastic manufacturing exports with respect to domestic real GDP shows the importance of economic growth to the performance of manufacturing exports. Therefore, policies aimed at boosting exports in the long term should aim to provide a conducive environment for economic growth rather than continuous devaluation of a domestic currency.

Suggested Citation

  • Bogale Hunegnaw, Fetene, 2017. "Real Exchange Rate and Manufacturing Export Competitiveness in Eastern Africa," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 32(4), pages 891-912.
    • Handle: RePEc:ris:integr:0742
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    Citations

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    Cited by:

    1. Norashida Othman & Zulkornain Yusop & Mohd Mansor Ismail & Syamsul Herman Mohammad Afandi, 2021. "Energy Tax and the Downstream Palm Oil Trade Competitiveness Nexus in Malaysia: An Application of GMM Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 593-599.
    2. Abolfazl Shahabadi & Shiva Amjadian & Samineh Ghasemifar & Masoume Shafieian, 2023. "The effect of the national brand on high-tech exports in selected countries," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-19, December.
    3. Oguzhan Ozcelik, 2022. "Does the Foreign Trade-Driven Competitive Power of Transition Economies Converge Toward that of EU14 Countries? Evidence from Fourier Panel Unit Root Test with Sharp and Smooth Breaks," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 0(36), pages 257-282, June.
    4. Abiola John Asaleye & Rotdelmwa Filibus Maimako & Henry Inegbedion & Adedoyin Isola Lawal & Adeyemi A. Ogundipe, 2021. "Real Exchange Rate and Manufacturing Performance in Nigeria," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 10, March.
    5. Kenneth Chikezie Anyalechi & Emeka Okereke & Ikechukwu S. Nnamdi, 2020. "Export Trade and Real Exchange Rate Dynamics in Sub-Saharan Africa: A Dynamic Panel Analysis," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(9), pages 222-227, September.

    More about this item

    Keywords

    ARDL Model; Eastern Africa; Exchange Rate; Manufacturing Exports;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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