The Implications of the Global Financial Crisis in the United States of America and the European Union on the Egyptian Economy: an Econometric Model

Abstract

Most recent studies in this field agree on the spread of the impact of the financial crisis that began from the Western economies to developing countries. The degree of this effect depends on the level of international trade and the size of foreign investment. In this study, a Moving-window Correlation analysis confirmed the link between the economic cycle in Egypt with its counterpart in both of the European Union and the United States. It is noted, however, that this link relaxed for a brief period during the heyday crisis. We suggest that this is explained by the application of temporary governmental policies to show a status of Economic stability. The regression analysis aims at the assessment of the impact of the current global crisis on the performance of the Egyptian economy in the light of its close commercial relationships with both the European Union and the United States. The results of the analysis show that the imbalances of the Egyptian economy during the period that passed from the crisis cannot be attributed directly to the business and financial relationship with the European Union and the United States. These imbalances represent continuous situation of the Egyptian economy before the crisis period, and may partially linked to indirect means such as lack of transfers from workers abroad and the weakness of tourism activity.