AN ECONOMETRIC STUDY OF THE PRESENT AND FUTURE EFFECT OF INFLATION ON ECONOMIC GROWTH IN EGYPT

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Inflation is meant the overall and continuing rise in prices by the impact of internal or external variables, produced by excess demand about supply capacity. Problem of the study: The Egyptian economy has a decline in overall economic indicators, most importantly is the overall growth rate, compared with a rise in inflation, poverty, unemployment, the low production and the continuing deficit in the trade balance, and in general budget, which are negative indicators for the Egyptian economy. Therefore, the study is trying to explain and study the problem of inflation, its direct and indirect effects on overall growth rates in the Egyptian economy. Research Objectives: Identify the reality of growth rate in the Egyptian economy; identify what are inflation types and methods of measurement, measuring interaction relationships between both of inflation rates and growth rates in the Egyptian economy, determine factors afficting of both inflation and growth rates in Egypt, to work on indirect effect in these phenomena by afficting on those factors. Results and recommendations 1-To study the effect of the most important variables of affected GDP at current and real prices in Egypt during the period (2003-2014): It turns out that study variables give effects on growth rate in real GDP at real prices consistent with economic logic, on the contrary effects of the growth rate of GDP at current prices. 2- Study interrelationships between the local annual growth rate at real and current prices and the annual inflation rate in Egypt during the period (2003-2014): It was concluded that data will be relied on real growth rate of GDP in its relations with inflation, where it is more logical from the economic point of view than the results of the GDP growth rate of GDP at current prices. 3- The relation between the inflation rate and growth rate GDP in real terms is negatively slope. 4- The results of the current economic model show that: The most important factors affecting in inflation rate and real growth rate in GDP are: First: Annual inflation rate in consumer prices (X2), it has a negative significant statistically effect for both of annual growth rate of GDP at real prices% (X6), net cash reserve (X8), and the balance of current transactions and transfers (X13). And positive significant statistically effect for both of exchange rate of the dollar declared by the Central Bank (X10), and and the total surplus (deficit) (X21). Second: Annual growth rate of GDP at real prices% (X6), it has a negative effect from, annual inflation rate in consumer prices (X2), and the exchange rate of the dollar announced by the Central Bank (X10), while the effect was statistically significant positive for both of, net cash reserve (X8), and the total surplus (deficit) (X21). 5- Best method to forcast the main variables under study of inflation rate and the real growth rate of GDP is the use of the simutianeous equation model it takes into consideration all external variables affecting the internal variables under study. It was reached by forcasting both of the Inflation rates and real GDP growth rates, that the policies followed by floating exchange rate, which requires an impact on all variables to the hoped results of the floating of the Egyptian pound. Therefore research recommends: to re-enter the Central Bank for determining the exchange rate of the Egyptian pound against other currencies, not directly to the currency exchange rate, but by indirect intervention through supply and demand control of the currency in Egyptian market against other currencies, by intervening in the market by selling and buying direct from banks, in addition to moving external variables affecting both inflation and real growth rates in Egypt to able to reach the resalts of simulitanuos equation model which takes into account all external variables related to the study variables.