Devaluation: Is it Contractionary or Expansionary to Economic Sectors? The Case of Egypt - Economic Research Forum (ERF)

Devaluation: Is it Contractionary or Expansionary to Economic Sectors? The Case of Egypt

Nada Shokry and Mohamed Bouaddi

November, 2018


29 pages

O2. Development Planning and Policy
E3. Prices, Business Fluctuations, and Cycles
C2. Single Equation Models
E2. Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
F3. International Finance
F. International Economics

This paper investigates the effect of changes in exchange rate on sectoral GDP in Egypt in the period between 1982 and 2014. For this purpose, the study uses a MIDAS regression to compare between the sign and magnitude of the effect of two exchange rate measures on 22 subsectors and 4 aggregate sectors’ production. One measure is the monthly deflated official bilateral exchange rate of EGP against the US dollar and the other one is the annual real effective exchange rate of the EGP. Interestingly, the results show consistent positive inelastic effect of changes in real EX rate on sectoral production, while showing consistent positive yet highly elastic effects of changes in REER. Analyzing the results of the REER estimation, most of the low elasticity sectors are public, non-tradable subsectors and contribute by only little to GDP, while most tradable large sectors are highly elastic.


تبحث هذه الورقة في تأثير التغيرات في سعر الصرف على  إجمالي الناتج المحلي القطاعي في مصر في الفترة بين عامي 1982و 2014. ولهذا الغرض ، تستخدم الدراسة انحدار  ميداس للمقارنة بين مؤشر وحجم تأثير اثنين من تدابير سعر الصرف على 22 ﻘﻄﺎع ﻔﺮعى وعلى إنتاج 4 ﻘﻄﺎﻋﺎت. أحد المقاييس هو سعر الصرف الثنائي الرسمي الشهري المنخفض مقابل الدولار الأمريكي ، والآخر هو سعر الصرف الفعلي الحقيقي السنوي للجنيه. ومن المثير للاهتمام ، أن النتائج تظهر تأثير متسق إيجابي وغير مرن  للتغيرات في معدل الصرف الحقيقي على الإنتاج القطاعي ، بينما تظهر تأثيرات متناسقة إيجابية ولكن مرنة للغاية للتغيرات في سعر الصرف الحقيقي الفعلى وﺑﺘﺤﻠﻴﻞ ﻧﺘﺎﺋﺞ ﺗﻘﺪﻳﺮ سعر الصرف الحقيقي الفعلى، ﻓﺈن ﻣﻌﻈﻢ ﻗﻄﺎﻋﺎت اﻟﻤﺮوﻧﺔ اﻟﻤﻨﺨﻔﻀﺔ هﻲ اﻟﻘﻄﺎﻋﺎت اﻟﻔﺮﻋﻴﺔ اﻟﻌﺎﻣﺔ واﻟﻘﻄﺎﻋﺎت ﻏﻴﺮ اﻟﻘﺎﺑﻠﺔ ﻟﻠﺘﺠﺎرة وﺗﺴﺎهم ﺑﻨﺴﺒﺔ ﻗﻠﻴﻠﺔ ﻓﻘﻂ ﻓﻲ إجمالى اﻟﻨﺎﺗﺞ اﻟﻤﺤﻠﻲ ، ﻓﻲ ﺣﻴﻦ أن ﻣﻌﻈﻢ اﻟﻘﻄﺎﻋﺎت اﻟﻜﺒﻴﺮة اﻟﻘﺎﺑﻠﺔ ﻟﻠﺘﺠﺎرة ﻣﺮﻧﺔ ﻟﻠﻐﺎﻳﺔ



Nada Shokry

Assistant Lecturer in Economics at the Arab Academy for Science and Technology in Alexandria


Mohamed Bouaddi

Associate Professor in Economics at the American University in Cairo



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