The effect of terms of trade on current account balance: Harberger-Laursen-Metzler effect in Arabic countries.

Hicham Ayad


The contribution of this paper is investigating the Harberger-Laursen-Metzler effect in the context of 18 Arabic countries since it’s the first time to test it Arabic countries over the period 2000-2017,  and was tested by using the Westerlund (2007) co-integration and Dumitrescu-Hurlin (2012) causality analysis in addition to the random effects model, empirical analysis show that there is no evidence of HLM effect for all the samples in short run term and there is no long-run relationship between the variables, but there is bi-directional causal relationship between terms of trade and current account balance in the middle incom countries in the long run term.

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