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Doha Development Round & Egypt : “What If The Capital is Endogenized?

Doha Development Round & Egypt : “What If The Capital is Endogenized? . The Turkish Team D.Selim PASLI, A.Emre AKEL, Iclal SINCER. OUTLINE. INTRODUCTION RESULTS DEMAND SIDE SUPPLY SIDE CONCLUSION. Introduction. What would happen to Egyptian economy

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Doha Development Round & Egypt : “What If The Capital is Endogenized?

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  1. Doha Development Round & Egypt : “What If The Capital is Endogenized? The Turkish Team D.Selim PASLI, A.Emre AKEL, Iclal SINCER

  2. OUTLINE • INTRODUCTION • RESULTS • DEMAND SIDE • SUPPLY SIDE • CONCLUSION

  3. Introduction • What would happen to Egyptian economy in the long run during DOHA Development process? : `the exogenous variable “capital” becomes endogenous…` So, the initial model reflects the short run while our model reflects the long run…

  4. Version • Version : egypt200 • 26 x 12 sectors and regions • Egypt, China, EU, LDC, India, USA… etc. • Apparel and Leather Products, Fibers, Textiles, Trade and Financial Services, Metal Products, Wood and Paper… etc.

  5. Closure What we have changed… • Trade balance is fixed swap dtbalr("LDC") = dpsave("LDC"); swap dtbalr("CENTAM") = dpsave("CENTAM"); swap dtbalr("Mexico") = dpsave("Mexico"); swap dtbalr("MERCOSUR") = dpsave("MERCOSUR"); swap dtbalr("CHINA") = dpsave("CHINA"); swap dtbalr("INDIA") = dpsave("INDIA"); swap dtbalr("JAPAN") = dpsave("JAPAN"); swap dtbalr("USA") = dpsave("USA"); swap dtbalr("Egypt" ) = dpsave("Egypt"); swap dtbalr("ROW") = dpsave("ROW"); • Capital is endogenized swap qo("capital" , REG)= expand("capital" , REG); # change in investment levels relative to endowment stock # (all,i,ENDWC_COMM)(all,r,REG), EXPAND(i,r) = qcgds(r) - qo(i,r)

  6. Shocks & Solution method We made no change in this part SHOCKSfrom CEPII DDA Scenarios and elimination of agricultural export subsidies; • Shock tms(AG_COMM, REG, REG) • Shock tms(NONAG_COMM,REG,REG) • Shock txs(AG_COMM,REG,REG) = target% 0 Solution Method • Gregg 2-4-6 steps extrapolation

  7. Results SR=initial report • Total welfare increased from 11 ml $ to 169 ml $. • Allocation efficiency and endowment effects are the main contributors.

  8. Results-Demand Side • The driving factor leading allocative efficiency from 70 ml $ to 104 ml $ is the capital : 0 to 30 million dollars… • tax rate on capital : 9.8% • dvol increases 300 ml $

  9. Results-Demand Side • Endowment effect increases from 74 ml $ to 211 ml $ : • Capital stock qo (capital) increases from 0 to 0.74% • All of the sectors increased their demand on capital; especially Wheat, Livestock, Paddyrice and Cereal. SO, IT IS THE FIRMS DRIVING THIS INCREASE IN DEMAND OF CAPITAL

  10. Results-Supply Side • The total welfare of the world also increased: 54 bl $ to 120 bl $... • In the short run savings decreased about 11%. Contrarily in the long run, savings increased about 12%... • By looking through the rate of return values, we saw that ‘rore’ decreased from 0.3 to -0.35 in the long run… • The price of the capital falls….

  11. CONCLUSION • In the long run, trade liberalization effects welfare much more positively compared to short run ! Egypt also benefits welfare increase… • The effects of allowing capital to expand has so many complicated linkages, generally as a mix composition of supply and demand side effects… • Further digging is essential and is on the process…

  12. THEN EVERBODY HAPPY

  13. THANK YOU

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