Macroeconomic effects of a currency devaluation in Egypt - An analysis with a computable general equilibrium model with financial markets and forward-looking expectations

This paper presents a general equilibrium model for Egypt, which allows for different forms of expectations formation and takes financial markets into account. Moreover, it uses a new calibration method. The model is used to examine the macroeconomic effects of a currency devaluation. The results show that the impact of a currency devaluation on the current account is small in the medium run, whereas effects on production are substantial in the medium term. Finally, results differ considerably for forward-looking or adaptive expectations. (C) 2001 Society for Policy Modeling. Published by Elsevier Science Inc.