Macroeconomic Dynamics of Egypt: An Integrated Approach to Trade and Exchange Rate Policy Reforms

The present study extends an earlier elasticities-absorption approach to the balance of payments to the analysis of the consequences of tariff reforms on the Egyptian macro-economy, particularly as it relates to fiscal revenue implications. From an analytical perspective, we use the Mundell-Fleming model to examine the effects of trade liberalization and exchange rate changes in an open macro-economy. The model is of an open economy in the familiar IS-LM framework that includes the determination of the trade and capital accounts of the balance of payments.