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.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Backus, David & Driffill, John, 1985.
"Inflation and Reputation,"
American Economic Review,
American Economic Association, vol. 75(3), pages 530-38, June.
[Downloadable!] (restricted)
Other versions:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)