The Egyptian Economy: A Modeling Approach

The Egyptian Economy: A Modeling Approach

The Egyptian Economy: A Modeling Approach

The Egyptian Economy: A Modeling Approach

Synopsis

Egypt experienced an economic shift from a managed economic strategy to one of market-oriented resource allocation starting in the 1970s, and in 1987 signed a stabilization program agreement with the International Monetary Fund. This is an overview of these structural changes experienced by the Egyptian economy in the 70s and 80s. The main tool to assess the effectiveness of the policies and to evaluate growth prospects under different policy scenarios is an integrated macroeconomic-energy demand-input/output model. Four different policy scenarios are explored.

Excerpt

In recent years, especially after the disintegration of the economic system of Eastern Europe and the Soviet Union, the emphasis of economic development policies in many countries has shifted from a managed economy strategy to one of market-oriented resource allocation. In Egypt that shift started much earlier with the introduction of new laws in 1974 to facilitate the implementation of the Open-Door Policy "Infitah" and to attract foreign and domestic private investment. In May 1987, Egypt signed a stabilization program agreement with the International Monetary Fund (IMF). The main features of the program are: gradual devaluation of the Egyptian pound and the establishment of an official free market for foreign currencies; increase in energy prices; increase in the prices of agricultural products in accordance with the international markets; decrease of the budget deficit to 13% of gross domestic product (GDP); and limiting monetary growth and increase in real interest rates. More recently, in 1991-1992, the Egyptian government implemented a program for the liberalization of international trade in which tariffs on imports were either reduced or eliminated. The full implications of the new policies on the Egyptian economy are not yet clear. In general, one should not assume the success of any policy without empirical analysis that supports or rejects that policy either separately or in conjunction with other groups of policies. The empirical evaluation of structural policies becomes more important in light of the debate in the literature regarding the merits of the market oriented development strategy. While some economists argue that an imperfect market works better than an imperfect government (see Roe,Roy and Sengupta 1989), others argue that since second- best does not guarantee optimality, government intervention should be . . .

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.