The long-term determinants of the real exchange rate in Egypt over the period 2002-2019

Abstract EN

Real exchange rate is determined by number of factors which are dynamic and country specific.

In Egypt, shifts in the exchange rate systems have been taking place since the fifties of the last century as a result of altering economic transition times.

The purpose of this paper is to describe and investigate the factors which determine the long-term determinants of the foreign exchange rate in the Egyptian economy over the period 2002-2019, using the Johansen-Juselius co-integration test.

The study concludes that the real exchange rate of the Egyptian pound is appreciated by governmental consumption, international reserves and workers' remittances, while GDP growth rates depreciate the real exchange rate of the Egyptian pound in the long run.

Added to that, the study has found that the degree of openness and terms of trade do not have a significant effect on the real exchange rate of the Egyptian pound over the long run.