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

Osama El-Baz

MPRA Paper from University Library of Munich, Germany

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).

Keywords: Potential Output; Output Gap; Production Function; HP Filter (search for similar items in EconPapers)
JEL-codes: E1 E17 E2 E22 E6 (search for similar items in EconPapers)
Date: 2016-11-05, Revised 2016-10-05
New Economics Papers: this item is included in nep-afr, nep-ara, nep-eff and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:75778

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