Title: Long and short run drivers of the real exchange rate in Egypt (2002-2020)

Authors: Hoda Mansour; Soliman Hassan

Addresses: College of Business, University of Business and Technology, P.O. Box 33335, Jeddah, 21448, Saudi Arabia ' Faculty of Commerce, Assuit University, El Fateh, Assiut Governorate 71515, Egypt

Abstract: Egypt is an emerging developing country which has a long history of utilising different exchange rate regimes. Since the liberalisation of its Egyptian pound in 2016, the country has been facing a set of challenges to stabilise its exchange rate. To suggest better policies, this paper examines the long and short run determinants of Egypt's real exchange rate. Using Johansen and Juselius co-integration test, VAR, and an error correction model, the study analyses data from 2002 to 2020 for Egypt. The study concludes that, in the long run, growth rate, international reserves, government consumption, terms of trade and workers' remittances all have a long-run impact on the real exchange rate, while the degree of openness has no significant impact. In addition, the study provides evidence that, on the short-run, the degree of openness and government consumption have significant impact on the real exchange rate. Results of this study infer a preference for a fixed or strictly managed exchange rate regime over a flexible regime.

Keywords: real exchange rate; Johansen and Juselius co-integration test; vector autoregressive model; VAR model; Egyptian pound.

DOI: 10.1504/IJEPEE.2025.148861

International Journal of Economic Policy in Emerging Economies, 2025 Vol.22 No.3/4, pp.271 - 290

Received: 15 Aug 2020
Accepted: 08 Dec 2021
Published online: 30 Sep 2025 *

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