The Effect of Economic Reform Policies on Human Development: Evidence from Egypt

Abstract

Using the VAR model, this paper investigates the impact of the economic reform policies adopted by the Egyptian government since the beginning of 1990s on human development in Egypt. The results indicate that both inflation and budget deficit have a negative impact on HDI. In addition, the cumulative effects of the lags of monetary and exchange rate reforms have a negative impact on HDI. In turn, policies aiming at liberalizing international trade have a positive effect on human development. The results also indicate that unexpected shocks in inflation rate or money supply have a permanent effect on HDI in Egypt. Besides, the prediction of HDI in Egypt suggests a decreasing trend through the period (2015-2020). The study provides some policy recommendations to enhance human development in Egypt along with targeting the reform of macroeconomic imbalances and promoting the economic growth.