An empirical investigation of the I.M.F. : approach towards macroeconomic adjustment in Egypt

Hemaya, EE

Abstract

This thesis examines the IMF approach to macroeconomic
adjustment in Egypt with, firstly, an empirical assessment of
the analytical foundations of this approach and, secondly, the
construction and estimation of a small macroeconomic model of
the Egyptian economy over the period 1952-86.
Following an overall appraisal of Egyptian macroeconomic
performance, with and without the application of Fund
financial-supported adjustment programmes (conditionality),
the main part of the thesis provides empirical evidence on the
determinants of aggregate foreign trade, money supply and
money demand and inflation.
Examination of determinants of foreign trade shows that demand
for exports is price-elastic, while demand for imports is
income-elastic. However, it appears that Egypt's export
supply is constrained by capacity. Consequently, devaluation
may not play a substantial role towards improving the trade
account.
Study of the monetary sector reveals that the money supply is
best regarded as endogenous, contrary to the assumption made
in the Fund approach. Assuming an endogenous money supply,
both stock adjustment-expectations and error correction models
of money demand behaviour reveal a well-fitting function.
The IMF view of inflation in LDCs is that it is essentially
a monetary phenomenon, i.e. caused by an excess supply of
money. Evidence is provided to show that, in addition to
money supply growth, structural bottlenecks and expectations
are also influential in the inflation process in Egypt and the
basic IMF view of inflation should be modified accordingly.
Finally, in order to explain changes in income, prices and
balance of payments in Egypt, a small aggregate macroeconomic
model is constructed and estimated. Unlike the conventional
IMF model, real output is not taken to be predetermined.
Estimates of the structural parameters as well as model
simulations suggest that the model performs well in tracking
the historical values of the dependent variables.

Citation

Hemaya, E. An empirical investigation of the I.M.F. : approach towards macroeconomic adjustment in Egypt. (Thesis). University of Salford

• Thesis Type: Thesis
• Deposit Date: Sep 22, 2011
• Publicly Available Date: Sep 22, 2011
• Award Date: Jan 1, 1990