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Is there a need for a Marshall plan in the Egyptian economy? An investigation of the fiscal stimulus package

El-Baz, Osama (2014): Is there a need for a Marshall plan in the Egyptian economy? An investigation of the fiscal stimulus package.

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Abstract

It has been three years since the outbreak of the January 25th revolution, the Egyptian economy has been suffering lower economic growth rates that reached 2.4 percent in 2012/2013, low investment rate triggered by the lack of security and political instability, which reached 13.3% in 2012/13, High unemployment rate among university graduates recorded 30.1 percent by the end of March 2013, and high poverty headcount ratio, which reached 25.2% in 2010/11. Egypt received economic aids of about US$ 12 billion from Arab Gulf States after June 2013. In order to stimulate the economy, the Egyptian government announced the first stimulus package program, of about LE 29.738 billion. I Used VAR models to estimate the elasticity of economic growth to public investment and four main public investment categories, both livelihood and industrial investments are expected to boost economic growth. The impact “short-run” multiplier is expected to be 0.625, the peak multiplier is expected to equal 1.68, and the cumulative “long-run” multiplier is expected to equal 1.58. Concerning the contribution of the fiscal stimulus program to economic growth, it is expected to boost real short-run economic growth rate by 0.61 percent, and it is expected to boost real long-run economic growth rate by 0.45 percent. If the second stimulus package is to be implemented, the short-run economic growth rate will be expected to reach 3.62 percent, also the long-run economic growth rate is expected to record 3.3 percent.

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