Egypt's External Competitiveness and The Equilibrium Real Exchange Rate

摘要

Egypt experienced an Economic reform program started in 1991; one of the main objectives of such a reform is to increase the external competitiveness of the Egyptian economy. This paper estimates the equilibrium real exchange rate of Egypt as one of the main indicators of the external competitiveness and as reference rate that is consistent with economic fundamentals. The rate is derived from the empirical estimation of a simplified theoretical model of the economy. While this theoretical construct is subject to the limitations of the necessary assumptions, it does provide a mean to evaluate movements in Egypt's real effective exchange rate and give a quantitative answer to the policy issue of overvaluation.