Final government consumer spending and its impact on the inflation rate in Egypt - an econometric study for the period 1976 – 2021

Inflation is considered one of the most important problems facing any country, whether developed or developing, as it leads to a decrease in the value of the currency and thus a decrease in real wages and thus a decrease in the standard of living of individuals. There are many causes of inflation, including an increase in government spending, which leads to an increase in aggregate demand over aggregate supply. The study aims to measure the impact of government spending with some other variables (interest rate “lending interest” – broad money“M2” - The foreign exchange rate) on the inflation rate in Egypt during the period (1976-2021), using the deductive approach based on the descriptive analytical method and quantitative analysis based on the use of econometric models, where the Bounds Test approach was used, using (ARDL Model). The study concluded with several results, the most important of which are: proving the co-integration relationship between the variables of the study, as well as the existence of a direct relationship between public spending and the rest of the variables of the study and the inflation rate in the long and short term, with the exception of the mass of money in circulation (M2), as the relationship is direct in the long term and inverse in the short term. The study recommended that public spending be directed to productive economic activities, and that government agencies must coordinate in investment spending to prevent the displacement effect, by encouraging private sector investments through small and medium enterprises.