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An extended RMSM-X model for Egypt : qualifications of market-oriented reforms (English)

Egypt has recently embarked on a new reform strategy to stimulate growth and achieve a better allocation of resources. The reform policy is designed to correct internal and external imbalances within a medium-term horizon. The initial conditions of the Egyptian economy as well as the ingredients of the reform package are quite similar to what is found in many reforming East European economies. This paper documents how an extended version of the World Bank's RMSM-X model was built for Egypt. The revised model focuses on industry investment efficiency and the linkage between investment and growth. One peculiarity of the model is a sectoral growth module which binds together the overall macroeconomic performance with sectoral output and investment. To illustrate the model's properties, the paper presents a quantification of the reforms in Egypt. The simulation is presented as a risk scenario - showing what could happen in the case of a domestic policy slippage. The results show that the trend in GDP growth would be 2.1 percentage points lower in the second half of the decade under a failure to implement the reform strategy, while the export growth is estimated to be 1 percentage points lower - mainly because of lower manufacturing exports.


  • Author

    Pedersen, Karsten Nimb MNA

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  • Document Type

    Departmental Working Paper

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  • Country

    Egypt, Arab Republic of

  • Region

    Middle East and North Africa,

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    An extended RMSM-X model for Egypt : qualifications of market-oriented reforms

  • Keywords

    Financial Sector;financial public sector;domestic rate of inflation;efficiency in resource allocation;public sector borrowing requirement;private sector foreign borrowing;nominal gross domestic product;consumption of energy product;rental price of capital;fixed exchange rate policy;liberalization of financial market;efficient allocation of resource;capital stock;stock of capital;Public Sector Enterprises;foreign direct investment;balance of payment;private investment;government sector;real exchange rate;foreign interest payment;domestic interest rate;flow of fund;profit and loss;factor of production;foreign exchange market;current account balance;currency in circulation;private consumption expenditure;foreign reserve holdings;accounting framework;consumer goods imports;public sector authority;financial sector balance;public sector investment;personal income tax;domestic price level;Public Enterprise Reform;rate of change;social security transfer;market for good;investments in agriculture;rate of depreciation;payments on time;rate of growth;capacity utilization rate;foreign credit;exogenous rate;competitive market conditions;government budget deficit;domestic money market;supply of good;social welfare objective;trade and investment;velocity of money;demand for good;efficiency of investment;foreign debt service;rates of interest;private capital inflow;level of employment;foreign exchange revenue;commodity price projection;revenues from oil;determination of price;production of cotton;relative price change;increase in prices;domestic capital stock;structural adjustment loan;economic reform program;Production Possibility Frontier;foreign interest rate;world market price;supply of credit;structural adjustment program;private sector credit;demand for import;liberalization of market;liberalization of prices;implicit energy subsidy;fruit and vegetable;change in demand;private sector management;foreign currency deposit;payment on debt;outstanding debt stock;cambridge university press;degrees of freedom;asset and liability;tax on imports;domestic bond market;liberalization of control;share of profit;export of goods;capital goods import;foreign exchange rate;country economic memorandum;speed of adjustment;import of goods;private sector demand;foreign exchange control;real government consumption;exchange rate rule;wages and salary;revenue from sales;free market price;removal of trade;foreign sector;capital account;downside scenario;capital transfer;budget constraint;domestic credit;public consumption;potential output;import share;investment efficiency;interest receipts;sectoral investment;factor income;national account;worker remittance;fiscal budget;export market;price liberalization;financing requirement;price control;behavioral equation;exogenous growth;Exchange Rates;egyptian pound;broad money;reform package;foreign competition;domestic industry;investment deflator;profit remittance;manufactured export;supply elasticity;export price;petroleum import;fiscal account;investment expenditure;capital ratio;consumption function;policy scenario;historical data;import data;money supply;base year;constant price;long-term relationship;estimation period;money demand;endogenous variable;net profit;production capacity;agricultural sector;world price;fiscal spending;Property tax;price elasticity;market clearing;domestic absorption;manufactured goods;import price;production output;real gdp;producer price;trade regime;real value;residual component;goods market;demand elasticity;efficiency gain;reform strategy;sales tax;energy price;estimation result;domestic demand;fixed coefficient;specialized bank;commercial bank;official statistic;capital grant;agricultural product;cotton price;fiscal policy;bond financing;gross investment;Fiscal policies;import substitute;credit supply;export growth;trade regulation;financing need;manufacturing sector;total consumption;market orientation;manufacturing export;standard commodity;macroeconomic balance



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Pedersen, Karsten Nimb MNA

An extended RMSM-X model for Egypt : qualifications of market-oriented reforms (English). Middle East and North Africa working paper series ; no. 7 Washington, D.C. : World Bank Group.