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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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slide1

Doha Development Round & Egypt :

“What If The Capital is Endogenized?

The Turkish Team

D.Selim PASLI, A.Emre AKEL, Iclal SINCER

outline
OUTLINE
  • INTRODUCTION
  • RESULTS
    • DEMAND SIDE
    • SUPPLY SIDE
  • CONCLUSION
introduction
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…

version
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.
closure
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)

shocks solution method
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
results
Results

SR=initial report

  • Total welfare increased from 11 ml $ to 169 ml $.
  • Allocation efficiency and endowment effects are the main contributors.
results demand side
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 $
results demand side9
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

results supply side
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….
conclusion
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…