TITLE:
The Arab League: Export Earnings and Economic Development
AUTHORS:
Raul Gouvea, Gautam Vora
KEYWORDS:
Commodities, Export Diversification, Portfolio Model, Single Index Model, Export Performance, Development Policies
JOURNAL NAME:
Modern Economy,
Vol.8 No.4,
April
27,
2017
ABSTRACT: The
countries of the Arab League paint a diverse picture of economic (and social)
performance and export-earnings performance. While Arab countries have formed numerous alliances
for one reason or another, the League of Arab States, more popularly known as
the Arab League, is the dominant one. One can, however, see a social,
political, economic development divide among them. Focusing on the export performance of these
countries during the period from 1988 through 2012, we examine stability of
export earnings as well as exports’ risk-return profile. The single index model
from the modern portfolio theory is used for empirical examination. The results indicate that
these countries exhibit a corresponding
performance divide for export-earnings. The oil and natural gas
exporters show a much higher sensitivity than non-oil exporters. Exporters with
a higher proportion of manufactured products show a much lower sensitivity. Examination
of risk-return tradeoff reveals a more complicated picture: Qatar, UAE and
Bahrain show the highest Sharpe ratio which is a measure of performance based
on total fluctuations whereas Lebanon, Jordan and Tunisia show the highest
Treynor ratio which is a measure of performance based on market-fluctuations.
The study concludes that different socioeconomic development policies are
needed for developed and developing countries of the Arab League. Several
structural challenges facing these countries are pointed out and discussed to
improve economic and export performances. These challenges can be overcome only
with sustained resolute action emanating from the highest level of political
control.