Specifying the Drivers of Terms of Trade in Egypt: Vector Error Correction Model Approach | ||
| Journal of Agricultural Economics and Social Sciences | ||
| Article 7, Volume 13, Issue 7, July 2022, Pages 285-291 PDF (957.73 K) | ||
| Document Type: Original Article | ||
| DOI: 10.21608/jaess.2022.147686.1061 | ||
| Author | ||
| V. Shaker* | ||
| Department of Agricultural Economics, Faculty of Agriculture, Cairo University, Egypt. | ||
| Abstract | ||
| Terms of Trade (TOT) affects international trade, acting as an engine for development. It refers to the relative price of exports in terms of imports. A rise or improvement in a country's TOT often denotes that export prices have increased while import prices have either held steady or decreased. In contrast, export prices may have decreased, but not by as much as import prices. Export prices may have remained stable while import prices have fallen, or they may have simply climbed faster than import prices. An improved TOT can come about in any of these conditions. Since the previous work has only focused on TOT as one of the driving factors affecting macroeconomic variables in the Egyptian context, this work attempts to specify the drivers of TOT as a dependent variable. Vector Error Correction Model is employed to identify the movement between the variables, using the available yearly data (1985-2020). The results prove that TOT is affected positively by inflation and exchange rate and negatively by the deposit interest rate in the long term. However, it is negatively impacted by the inflation rate in the short term. Policymakers might utilize fiscal and monetary policies to control inflation and direct TOT in the short run. Future investigations are necessary to validate the kinds of conclusions that can be drawn from this study. | ||
| Keywords | ||
| Terms of trade; Fiscal policy, Monetary policy, Vector Error Correction Model, Egyptian economy | ||
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