8,955 research outputs found

    Inflation Dynamics: The Case of Egypt

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    Inflation as a phenomenon has witnessed remarkable changes starting from mid-eighties of the last century. Inflation rates have become less persistent, less responsive to supply side shocks. In addition, the relative importance of demand pull inflation as one of the major determinants of inflation has decreased due to efficient monetary policies that have been adopted by central banks all over the world to reduce inflation based on anchoring inflation expectations. Moreover, the slope of Phillips curve has flattened as many factors have appeared to be more influential on inflation rather than output gap, namely inflation expectations. These changes constitute in the new economic literature what so called “Inflation Dynamics”. In this context, this study focuses on analyzing inflation dynamics in Egypt in (1980-2009) in order to identify to what extent “Inflation Dynamics” in Egypt is different from or similar to those witnessed globally. The study applied a Vector Auto Regressive model (VAR) and other econometrics models to analyze “Inflation Dynamics” in Egypt in three sub periods: the 1980s, the 1990s and the first decade of the new millennium. The study concluded that Inflation Dynamics in Egypt is completely different from those observed globally. Inflation rates in Egypt have become more persistent especially starting from 2000; Inflation shocks are now lasting longer and have a long-term impact on the future inflation paths. On the other hand, demand bull inflation still considers one of the most important inflation determinants, as it is solely responsible for explaining 30% of the changes in inflation rates. In addition, the study confirmed that inflation rates in Egypt have become more responsive to supply side shocks starting from 2006. As for the slope of Phillips curve, the study confirmed that similar to the changes observed globally, the slope of Phillips Curve for the Egypt economy has flattened reflecting the increasing importance of other inflation determinants rather than output gap.Inflation, Inflation dynamics, Inflation persistence, The Egyptian economy, Demand-pull inflation, Cost-push inflation, Inflation expectations, markets and prices rigidities, Phillips curve, Government debt, Monetary policies, Vector Auto Regression (VAR)

    Towards Inflation Targeting in Egypt: Fiscal and institutional reforms to support disinflation efforts

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    This paper reviews the prerequisites of inflation targeting, analyses the extent to which they are met in Egypt and examines whether the Egyptian economy, under its current status, is ready to formally adopt an inflation targeting regime. It discusses why developing strong fiscal, financial and monetary institutions is so critical to the success of inflation targeting and explains how, even if the prerequisites are not stringently fulfilled in the beginning of its adoption, the move towards them is believed to contribute to the macroeconomic stability of the country. More particularly, the focus is being put on fiscal balance, the financial sector and central bank independence. Since we believe that the latter is the most important condition in the inflation targeting implementation process, the paper discusses the CBE's independence and underlines the importance of issues related to transparency, credibility, technical capabilities and accountability. Finally, the paper draws some conclusions and formulates some policy recommendations on the adjustments the country should put in place in order to ensure a successful transition towards an inflation targeting regime. Keywords: Egypt, Inflation targetting, Financial reformsEgypt, Inflation targetting, Financial reforms

    Money, inflation, and deficit in Egypt

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    Egypt has been able to escape high inflation by depleting its stocks of creditworthiness, money illusion, and enforceable foreign-exchange controls. These nonrecoverable assets are quickly becoming extinct and the economy is on an unsustainable path. The authors present a short- and medium-term dynamic model of the Egyptian economy and use it to simulate the effects on output and inflation of a stabilization-cum-adjustment program. Their conclusion is to make the public sector live within its means, and to do so at once. This is a demanding prescription; political and social pressure can become intolerable under adjustment. The authors show that both a slowdown in output and the initial rise in inflation associated with a tough reform program will be short-lived. And a do-nothing strategy will soon push the country into a serious crisis, the correction of which will certainly be more painful.Economic Theory&Research,Economic Stabilization,Environmental Economics&Policies,Banks&Banking Reform,Public Sector Economics&Finance

    Influences on Business Journalists in Egypt During IMF-backed Economic Adjustments of 2016-2019

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    The economic adjustments that Egypt implemented as part of an IMF-backed program between 2016 and 2019 were a milestone event in the country\u27s economic history. Business journalism was an important part of it as people, policymakers and businesses tried to grasp the developments. Using qualitative in-depth interviews with business journalists and editors, this study attempts to examine the various influences experienced by journalists that affected their framing of news and the quality and type of coverage. The study argues that journalists came under the influence of political pressure and media controls, as well as the technical allure of market sources which helped unify narrative and suppress diverse opinions. The study also shows that although political pressures were an important determinant of coverage, it was not the only major form of pressure. Structural factors that have to do with business models and working routines of media outlets helped trim the narrative and censor alternative perspectives. The study highlights the importance of a review of media regulations and communication policies that would ensure a fair and valuable coverage in the future that is helpful to the audience

    Inflation tax and deficit financing in Egypt

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    Although Egypt's budget deficit is far above the level found in other low-middle-income countries, the inflation rate in Egypt has never been very high. This is because the country has managed to finance these budget deficits by resorting to an inflation tax that, at 11 percent of GDP in 1987, constitutes a large share of total tax revenues. By contrast, conventional tax revenues come to only 17 percent of GDP. The authors report a large, underlying inflation-tax base - from which the Egyptian government has collected substantial revenues which exist because of money balances held by the private sector. The authors find that the private business sector, with anet borrowing position of 14 percent of GDP, has benefited from the inflation tax. Households, on the other hand, pay more of the inflation tax than other sectors, turning over 8 percent of GDP to the government. This compares with 0.5 percent of GDP that households pay in income tax. Although income tax in Egypt is fairly progressive, the greater reliance on the inflation tax makes Egypt's overall tax structure fairly regressive. The authors argue that : i) understanding the role and size of the inflation tax will help in determining the sequencing and equity aspects of any future reform program; and ii) the financial side cannot continue to bear the burden for the real side; Egypt must move swiftly to cut its budget deficit, the underlying cause of its dependence on the inflation tax.Economic Theory&Research,Public Sector Economics&Finance,Banks&Banking Reform,Environmental Economics&Policies,Macroeconomic Management

    The Utilization of the Rule of Law for Economic Development in Developing States: The Case of Egypt from Nasser to Mubarak

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    Neoliberal development proponents argue that the rule of law is essential for achieving economic development. It demands adjusting legislative and legal institutional practices to enforce and protect market operations, and the minimizing of state intervention. The IFIs and the developed states adopted this development approach in dealing with developing states through conditional-based lending. Through attaching structural regulative adjustments and the reformation of juristic institutions as preconditions to their fiscal assistance, the IFIs, influenced by the developed states, were able to impose a system of legal economic governance over the developing economies. Across the different development stages, developing states who did not follow the neoliberal development approach managed to achieve greater economic growth in comparison to those who followed it. This paper analyses the rule of law through the different development phases starting in the 1950s till the 2000s. It assesses their interaction with the different economic development paradigms. It defines the techniques and outcomes of adopting the rule of law by the main development actors, mainly the developed and developing states, the IFIs, and the international economic order. It evaluates the essentiality of the rule of law for achieving economic prosperity as a central neoliberal claim. As a case study, this thesis charts the economic transformation of the Egyptian economy from state-led to market-oriented as an economic adjustment transformation that was supervised by the IFIs. The paper argues that, despite the implementation of the rule of law in Egypt as required by the IFIs, the expected economic development was not achieved. Based on such study, this paper undermines the essentiality of the rule of law for economic development and deems it as a neoliberal instrument for economic governance rather than a prerequisite for development

    Agricultural Trade Implications of European Community Enlargement: North America Common Market

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    Membership in the European Community (EC) for Greece, Spain, and Portugal may reduce trade between the United States and the EC in selected commodities; prospects for a North American Common Market are not bright; and the diversion of agricultural crops from export to fuel alcohol production would very likely increase, rather than reduce, balance-of-payment deficits for the United States and Brazil. The first meeting of the Consortium on Trade Research, established by the Economics and Statistics Service's International Economics Division and several universities, focused on and continues to analyze these and other global topics.Trade, Research, European Community, North American Common Market, Fuel alcohol, International Relations/Trade,

    Energy Subsidies in the Arab World

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    The policy of maintaining tight control of domestic energy prices has characterized the political and economic environment in most Arab countries, together with many other parts of the world, for decades. The objectives behind such a policy range from overall welfare objectives such as expanding energy access and protecting poor households’ incomes; to economic development objectives such as fostering industrial growth and smoothing domestic consumption; and to politi- cal considerations, including the distribution of oil and natural gas rents in resource-rich countries. While energy subsidies may be seen as achieving some of a country’s objectives, this paper argues they are a costly and inefficient way of doing so. Energy subsidies distort price signals, with serious implications on efficiency and the optimal allocation of resources. Energy subsidies also tend to be regressive, with high-income households and industries benefiting proportionately most from low energy prices. However, despite such adverse effects, energy subsidies constitute an important social safety net for the poor in many parts of the Arab world, and any attempts to reduce or eliminate them in the absence of compensatory programmes would lead to a decline in households’ welfare and erode the competitiveness of certain industries. Therefore, a critical factor for successful reforms will be the ability of governments to compensate their populations for the reduction or removal of subsidies through carefully designed mitigation measures that protect the poorest and assist the economy in its long-term adaptation. We argue that a reform of energy pric- ing mechanisms in the Arab world may be seen as beneficial from more than one perspective, and as offering potential paths for reform. Nevertheless, this paper recognizes that the current political climate in the region will render the reform of domestic energy prices difficult in practice, such that reform may indeed be a medium- to long-term endeavour

    Equilibrium exchange rate and misalignment In selected MENA countries

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    The purpose of this paper is to estimate the equilibrium real exchange rate and derive the degree of misalignment for five MENA currencies: the Algerian Dinar, the Moroccan Dirham, the Egyptian Pound, the Tunisian Dinar and the Turkish lira. Exchange rate policy represents a key tool in macro-economic management and dominates the public policy debate today. How to assess whether exchange rate is undervalued or overvalued with respect to its equilibrium value is clearly at the heart of this debate. An extensive analysis of the degree of misalignment of the five currencies is undertaken on the basis of detailed country specific data. Overall, our results pick up almost perfectly the exchange rate policy episodes in the five countries.Exchange rate; Misalignment; Equilibrium exchange rate

    DEBT SUSTAINABILIY AND ECONOMIC GROWTH IN EGYPT

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    The persistence growth of Egypt's public domestic debt has raised concerns regarding its impact on economic growth and fears are being express about the debt sustainability. Utilizing data for the period 1981-2006, the results obtained from cointegration model reveal that the public domestic debt in Egypt has a robust negative impact on growth. The sustainability of debt was examined used some algebra methods. The results suggested that the recent path of debt followed in Egypt was sustainable. For debt to remain sustained in future, substantial fiscal reforms are needed and policies should be adopting to maintain an increasing growth-interest rate differential.Public Domestic Debt; Fiscal Budget; Debt Sustainability; Economic Growth; Cointegration.
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