The impact of the budget deficit on economic growth in Egyptthrough applying the Threshold Regression Model

غازى, سمر الامير غازى عبدالحميد; الجزار, فاروق فتحى

doi:10.21608/sjsc.2023.179989.1215

The impact of the budget deficit on economic growth in Egyptthrough applying the Threshold Regression Model

نوع المستند : المقالة الأصلية

المؤلفون

¹ کليه تجارة جامعه طنطا

² کليه تجاره جامعه طنطا

10.21608/sjsc.2023.179989.1215

المستخلص

This study examines the impact of the budget deficit on economic growth in Egypt during the period from 1995/1996 to 2020/2021. We apply the Threshold Regression Model by identifying three threshold levels of budget deficit: 1) base threshold level –9.5, 2) decreased threshold from –9.5 to less than 1%, and 3) positive surplus of 1%. Our results indicate that the relationship between budget deficit and the growth in GDP is not consistently a linear one depending on the deficit level. In threshold one where the deficit level is –9.5, the impact on the growth in GDP is a decrease of 0.265 for each one percent increase in the deficit. In setting two where the threshold level is less than -9.5% to zero deficits, the decline in GDP increased to 0.650. In the last setting where there is a surplus in the budget, the relationship between GDP and the budget turned positive to 2.14 percent for each one percent of budget surplus. The findings of this study have crucial implications for the government of Egypt in managing the budget and public debt. If the country plans for achieving economic growth, it is necessary to keep budget surplus at one percent or higher. .

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