Do the exchange rate policies have an effect on exports and imports in developing countries?

The aim of this study is to investigate empirically the relationship between the real effective exchange rate (REER) and both exports and imports in selected developing countries for the period of 1980-2009, using the vector error correction model (VECM), the standard Granger causality model, and generalized impulse response functions (GIRF). VECM and standard Granger causality model results show that there is causality from REER to exports in Algeria, Nicaragua and Tunisia. These results also show that there is causality from REER to imports in Cameroon, Nicaragua, and South Africa. In addition, G1RFs results reveal that exchange rate policies do not affect exports positively, and imports negatively. Overall findings indicate that exchange rate policies do not support the expected results in the developing countries.