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Estimating Aggregate Demand in Egypt

Author

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  • Emara, Noha
  • Mordos, Elise
  • Tyagi, Sonika

Abstract

This econometric study seeks to determine the most important factors of aggregate demand in Egypt so as to provide insight into how this developing nation can grow economically in the coming years. The Ordinary Least Squares estimation method was used in order to estimate nominal GDP for the time period 1975 to 2009. Based on the results the real interest rate, the inflation rate, the growth rate of government expenditure, and the growth rate of the money supply are the most statistically and economically significant factors of the growth rate of nominal GDP for the coming year. A one percent change in the growth rate of the previous year government expenditure is predicted to cause the growth rate of the current year nominal GDP to increase by 54%. The role of government expenditures on public sector wage expansion is discussed in this study as to shed light on this factor’s significant influence on income inequality post-1975 in Egypt, which will continue to impact nominal GDP and social conditions for the developing nation in the coming years.

Suggested Citation

  • Emara, Noha & Mordos, Elise & Tyagi, Sonika, 2015. "Estimating Aggregate Demand in Egypt," MPRA Paper 68701, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68701
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    References listed on IDEAS

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    1. El-Sakka M. I. T. & Ghali Khalifa H, 2005. "The Sources of Inflation in Egypt: A Multivariate Co-integration Analysis," Review of Middle East Economics and Finance, De Gruyter, vol. 3(3), pages 84-96, December.
    2. Magda Kandil, 2009. "Public Spending and the Macroeconomy: Evidence from Developing and Developed Countries," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 8(2), pages 133-158, August.
    3. Fiorito, Riccardo & Kollintzas, Tryphon, 1994. "Stylized facts of business cycles in the G7 from a real business cycles perspective," European Economic Review, Elsevier, vol. 38(2), pages 235-269, February.
    4. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," The World Bank Economic Review, World Bank, vol. 14(2), pages 251-285, May.
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    More about this item

    Keywords

    aggregate demand; growth; Egypt;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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