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Egypt beyond the crisis : medium-term challenges for sustained growth

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  • Herrera, Santiago
  • Youssef, Hoda
  • Youssef, Hoda
  • Zaki, Chahir

Abstract

The paper analyzes the impact of the recent global crisis in the context of the previous two decades'growth and capital flows. Growth decomposition exercises show that Egyptian growth is driven mostly by capital accumulation. To estimate the share of labor in national income, the analysis adjusts the national accounts statistics to include the compensation of self-employed and non-paid family workers. Still, the share of labor, about 30 percent, is significantly lower than previously estimated. The authors estimate the output costs of the current crisis by comparing the output trajectory that would have prevailed without the crisis with the observed and revised gross domestic product projections for the medium term. The fall in private investment was the main driver of the output cost. Even if private investment recovers its pre-crisis levels, there is a permanent loss in gross domestic product per capita of about 2 percent with respect to the scenario without the crisis. The paper shows how the shock to investment is magnified due to the capital-intensive nature of the Egyptian economy: if the economy had the traditionally-used share of labor in income (40 percent), the output loss would have been reduced by half.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5451.

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Date of creation: 01 Oct 2010
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Handle: RePEc:wbk:wbrwps:5451

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Keywords: Economic Theory&Research; Debt Markets; Access to Finance; Emerging Markets; Banks&Banking Reform;

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  1. Juan Carlos Conesa & Timothy J. Kehoe & Kim J. Ruhl, 2007. "Modeling great depressions: the depression in Finland in the 1990s," Staff Report, Federal Reserve Bank of Minneapolis 401, Federal Reserve Bank of Minneapolis.
  2. Rice, Patricia & Venables, Anthony J., 2004. "Spatial Determinants of Productivity: Analysis for the Regions of Great Britain," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4527, C.E.P.R. Discussion Papers.
  3. Pritchett, Lant, 2000. "The tyranny of concepts - CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital," Policy Research Working Paper Series 2341, The World Bank.
  4. Arestoff, Florence & Hurlin, Christophe, 2006. "Estimates of government net capital stocks for 26 developing countries, 1970-2002," Policy Research Working Paper Series 3858, The World Bank.
  5. Reinhart, Carmen M. & Talvi, Ernesto, 1998. "Capital flows and saving in Latin America and Asia: a reinterpretation," Journal of Development Economics, Elsevier, Elsevier, vol. 57(1), pages 45-66, October.
  6. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262150476, December.
  7. Antonio Fatás & Ilian Mihov, 2003. "The Case For Restricting Fiscal Policy Discretion," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(4), pages 1419-1447, November.
  8. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, Elsevier, vol. 74(1), pages 119-147, September.
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Cited by:
  1. Constantino Hevia & Norman Loayza, 2012. "Saving And Growth In Egypt," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1250002-1-1.
  2. Peeters, Marga, 2011. "Demographic pressure, excess labour supply and public-private sector employment in Egypt - Modelling labour supply to analyse the response of unemployment, public finances and welfare," MPRA Paper 31101, University Library of Munich, Germany.
  3. Marga Peeters, 2011. "Modelling unemployment in the presence of excess labour supply," Journal of Economics and Econometrics, Economics and Econometrics Research Institute (EERI), Brussels, Economics and Econometrics Research Institute (EERI), Brussels, vol. 54(2), pages 58-92.

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