TY  - JOUR
AU  - Macedo,Jorge Braga de
TI  - Currency Diversification and Export Competitiveness: A Model of the "Egyptian Disease"
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 776
PY  - 1983
Y2  - June 1983
UR  - http://www.nber.org/papers/w0776
L1  - http://www.nber.org/papers/w0776.pdf
N1  - Author contact info:
Jorge Braga de Macedo
Universidade Nova de Lisboa
Faculty of Economics
Campus Campolide
1099-032 Lisbon
PORTUGAL
Tel: +351-213630778
Fax: +351-213631460
E-Mail: jbmacedo@fe.unl.pt
AB  - The paper presents a dynamic portfolio model under currency inconvertibility which rationalizes the recent Egyptian experience of real exchange rate appreciation and currency diversification following the increase in oil exports and the partial financial liberalization that took place after 1976. The two shocks are linked because the relative price of manufacturing exports in terms of oil is also the premium of the black market rate over the official exchange rate. The effects of various official exchange rate policies on the temporary equilibrium values of the premium and the real wage and on the steady-state values of asset stocks are examined. A review of the Egyptian experience shows that as the model suggests the official devaluation of 1979 was ineffective against the "Egyptian disease" so that little can be expected from the 1981 devaluation. In light of the model results, a crawling peg policy is proposed instead.
ER  -