Do income leakage variables have a positive or negative impact on the performance of the economy ? : empirical study on Egypt

Abstract EN

This study applied the two-stage least squares model (TSNLS and ARMA) to examine the effect of income leakages, represented by spending on imports and domestic savings, on the aggregate domestic demand, represents the sum of domestic consumption and investment spending, in Egypt, through the velocity of the money supply channel during the period 2000-2019.

The empirical findings show a one-year lag negative impact flowing from the velocity of the money supply to the aggregate domestic demand, and the negative statistical response of the aggregate domestic demand to the velocity of money supply becomes more powerful and statistically meaningful when the income leakage variables have been considered in the model.

Thus, it can be said that income leakage variables contribute to the negative impact of the velocity of money supply on the performance of the Egyptian economy.