Abstract
This paper investigates the factors that affect Egypt’s bilateral export flows to its main trading partners. Based on the panel data, the gravity model approach has been used to estimate Egypt’s exports through annual data covering the period 2000 to 2013 for 42 main trading partners. The gravity model in its fixed effects panel data explained 84 percent of the fluctuations in Egypt’s exports. The results show that Egypt’s GDP, importer’s GDP, importer’s population, regional trade agreements (RTA) and the border between Egypt and its trading partner are the main factors affecting Egypt’s exports to its main trading partners. All these factors affect Egypt’s exports positively. Transportation costs (distance variable) are found to have negative but insignificant effect on Egypt’s exports. All these results can help the government and policy makers to undertake appropriate measures to improve the performance of the Egyptian foreign trade sector.
Highlights
Exports of goods and services represent one of the most important sources of foreign exchange income that ease the pressure on the balance of payments and create employment opportunities [1]
The Egyptian exports are not widely diversified, but dominated by few products such as chemicals and agricultural products that lead to higher concentration in export products, and in turn to highly concentrated export destinations. Given this importance and the role foreign trade sector plays in the Egyptian economy, it is important to find out the economic factors influencing Egyptian exports in order to help the government and policy makers to undertake appropriate measures to improve the performance of the foreign trade sector
Since this paper deals with the Egyptian export flows to its main importing partners, the fixed effects model will be a more appropriate model than the random effect model
Summary
Exports of goods and services represent one of the most important sources of foreign exchange income that ease the pressure on the balance of payments and create employment opportunities [1]. Export trade is crucial to meet the “foreign exchange gap”, to increase the import capacity of the country concerned and to reduce dependence on foreign aid [2]. Exports can increase intra-industry trade, help the country to integrate in the world economy and reduce the impact of external shocks on the domestic economy [3]. Experiences of Asian and Latin American economies provide good examples of the importance of the export sector to economic growth and development, which led economists to stress the vital role of exports as the engine of economic growth [4].
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