Determinants of Egyptian Agricultural Exports: A Gravity Model Approach

In this paper, a gravity model approach was employed to analyze the main factors influencing Egypt's agricultural exports to its major trading partners for the period 1994 to 2008. Our findings are that a one percent increase in Egypt's GDP results in roughly a 5.42 percent increase in Egypt's agricultural export flows. In contrast, the increase in Egypt's GDP per capita causes exports to decrease, which is attributed to the fact that an increase in economic growth, besides the increasing population, raises the demand per capita for all normal goods. Hence, domestic growth per se leads to reduced exports. The exchange volatility has a significant positive coefficient, indicating that depreciation in Egyptian Pound against the currencies of its partners stimulates agricultural exports. Transportation costs, proxied by distance, are found to have a negative influence on agricultural exports. These results are important for trade policy formulation to promote Egyptian agricultural exports to the world market.