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Investigating the Trajectory of Egypt’s Potential Output: Pre and Post the Arab Spring

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  • El-Baz, Osama

Abstract

The Egyptian economy has witnessed a plunge in its main macroeconomic indicators after the Arab spring as reflected in the estimated Economic Stability Trend Index (ESTI). The main purpose of the paper was to estimate Egypt's potential output and identify the factors that might be responsible for the divergence of actual and potential output from each other. The production function approach was used to derive estimates of both potential output and output gap over the period (1990-2014). The results of the analysis revealed that capital stock was the dominant factor contributing to potential GDP growth in Egypt, while the shares of both labor and total factor productivity in potential GDP growth rate have been fluctuating over time. Intellectual property protection, efficiency of the legal framework in settling disputes, strength of investor protection, and other factors exhibited a strong positive relationship with output gap in Egypt over the period (2010-2014).

Suggested Citation

  • El-Baz, Osama, 2016. "Investigating the Trajectory of Egypt’s Potential Output: Pre and Post the Arab Spring," MPRA Paper 75778, University Library of Munich, Germany, revised 05 Oct 2016.
    • Handle: RePEc:pra:mprapa:75778
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    References listed on IDEAS

    as
    1. Patrick Blagrave & Mr. Roberto Garcia-Saltos & Mr. Douglas Laxton & Fan Zhang, 2015. "A Simple Multivariate Filter for Estimating Potential Output," IMF Working Papers 2015/079, International Monetary Fund.
    2. International Monetary Fund, 2010. "Estimating Potential Output with a Multivariate Filter," IMF Working Papers 2010/285, International Monetary Fund.
    3. Mr. Natan P. Epstein & Corrado Macchiarelli, 2010. "Estimating Poland's Potential Output: A Production Function Approach," IMF Working Papers 2010/015, International Monetary Fund.
    4. Mr. Tetsuya Konuki, 2008. "Estimating Potential Output and the Output Gap in Slovakia," IMF Working Papers 2008/275, International Monetary Fund.
    5. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 361-368, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Potential Output; Output Gap; Production Function; HP Filter;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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