Estimating the Economic Growth in Egypt between War and Revolution

Abstract

Economic growth is the main objective of economic activities for any country, especially if this country is trying to get rid of developing countries group and enters developed countries group. Estimating the economic growth in developing countries is a sophisticated process; because the problems of data availability, frequency, and quality. Egypt has a long history in this issue, i.e. estimating the economic growth.
The main motive behind this research is investigating the determinants of economic growth in Egypt for the period extended from the 1973 War to the 25th of January 2011 Revolution. This research will try to uncover the reasons of fluctuations of economic growth in Egyptian economy, which lead Egyptians to demonstrate against the political regime of President Mubarak. This research will concentrate on variables like fiscal capital, human capital, trade openness, and inflation, as the main determinants of economic growth in Egypt. The choice of these variables was leaded by Economic theory and empirical studies.
The research hypotheses are: 1) monetary instability (higher inflation rate) will affect economic growth negatively, and 2) trade liberalization leads to encourage economic growth. Theses two hypotheses were tested statistically, and results shows that we can accept both in case of Egypt.
Findings of this research refer to the positive impact of changes in fiscal capital, human capital, and trade openness on Economic growth, while, the impact of inflation on growth is negative. Engle-Granger Two-Step Cointegration Model, i.e. Error-Correction Model (ECM), is used to estimate the economic growth in Egypt.