Studying The Causal Relationships and Forecasting of The Most Important Macroeconomic Variables in Egypt using VAR Model | ||
| Alexandria Science Exchange Journal | ||
| Article 29, Volume 45, Issue 3, September 2024, Pages 843-868 PDF (561.49 K) | ||
| Document Type: Original Article | ||
| DOI: 10.21608/asejaiqjsae.2024.378695 | ||
| Author | ||
| Mahmoud Abdeltawab Arafa* | ||
| Agricultural Economic Dep., Faculty of Agricultural, Cairo University, Egypt | ||
| Abstract | ||
| Capturing macroeconomic data involves formulating a system that describes the joint behavior of several aggregate variables. Recursive structures became popular, with Sims (1980) forcefully reintroducing the idea after quarterly and monthly data began to be published. To summarize and describe the data, all variables were taken to depend on the lags of all variables. This system is known as Vector Auto-regression (VAR). Restricted Standard-VAR (RSVAR) model is used for Egyptian economic to investigate the interactive relationships of macroeconomic variables, real gross domestic product, real total investment, real interest rate, foreign direct investment in dollars. To achieve the paper aims, quarter data through (2007q01 to 2023q04), about 68 observations, is used. Augmented Dicky-Fuller (ADF) is used to test the unit root in time series data. All-time series not stationary at the level but at the first difference. Model order and identification is proceeded at 5% level of significant as Restricted SVAR(12) by the criterion; Sequential modified LR test statistic, Final Prediction Error (FPE), Akaike Information Criterion (AIC), Schwarz Information Criterion (SC), Hannan-Quinn Information Criterion (HQ). The empirical model's results verified that the GDP is affected by total investments for the 4th lag by about EGP 0.125 billion, the interest rate for 12th lag by about EGP (0.051) billion, and foreign direct investment by about EGP 0.311 billion. The results for the forecast during the fourth quarter of 2025, the value expected of the GDP about EGP 3803 billion, total investments about EGP 398 billion, and foreign direct investment about 1.81 billion dollars. Based on the results, policy makers should be encouraging total investments by leading interest rates, which leads to an increase in the value of GDP, stimulating GDP by encouraging and increasing net foreign direct investment. | ||
| Keywords | ||
| Egypt; Vector Auto-regression; Gross Domestic Product; Total Iinvestments; Net foreign direct investments; Interest Rates; Forecasting | ||
|
Statistics Article View: 169 PDF Download: 136 |
||
