Factors influencing exports in Somalia: analyzing the impact of conflicts and unregulated exchange rates

The absence of strong government institutions with an unregulated exchange rate, as well as the presence of conflicts, has weakened Somalia’s exports to international markets. In this regard, this study examines the impact of unregulated exchange rates and conflicts on exports in Somalia using annual time-series data spanning 1985–2019. This study also employs several econometric methods, such as the Autoregressive Distributed Lag (ARDL) model and fully modified ordinary least squares (FMOLS) methods. The empirical results reveal that an unregulated exchange rate undermines exports in the short run but not in the long run, whereas conflicts, especially internal conflicts, inhibit exports in the long run. However, this study proposes that Somalia’s monetary authority print new currency denominations to regain an effective monetary policy tool, including exchange rate determination, to impact exports. In addition, the federal and state governments of Somalia and their communities should work together to defuse all forms of conflict that hinder economic stability and export performance.