CURRENCY, CAPITAL, AND COMMERCE: MACROECONOMIC DRIVERS OF EXPORT PERFORMANCE

Abstract

This study investigates the effects of four macroeconomic determinants which are exchange rate, foreign direct investment, trade openness, and inflation rate on total country exports for a set of economies by using model validation techniques and empirical evidence. We first performed regression analysis to determine the significance of the estimated model and diagnostic tests, including a Durbin–Watson statistic, to assess the robustness and efficiency of the estimated model. The results show that exchange rate, FDI and trade openness have a positive significant effect on total exports while the inflation exerts negative significant effect. The value of the coefficient of determination also confirms that these variables jointly explain a large proportion of variation in export performance, reinforcing confidence in the model. These findings suggest that exchange rate stability, increased trade integration and an expansion in inflows of export-oriented foreign direct investment favor exports' performance, while inflation erodes the ability to compete abroad. The paper implies that a cohesive policy on trade liberalization, foreign direct investment (attracting), exchange rate stability and inflation control should embedded at the national level in order to guarantee export-led sustainable growth.