Use the demand-supply fundamental model to illustrate the changes in the value of the Egyptian pound (EGP) against the U.S. dollar (USD) in the past few years. In your answer, try as much as possible to distinguish between the demand-side factors and the supply-side factors as discussed in class. Finally, show how the intervention by the Central Bank of Egypt (CBE) at some point has led to the creation and deepening of the “Black Market”. Although drawing graphs is not necessarily required, yet it will definitely help you to illustrate your answer.
In past 5 years, we see that, Value of. 1USD equals following :
2015: 6.50 EGP
2016: 7.00 EGP
2017: 18.68 EGP
2018: 17.62 EGP
2019: 16.14 EGP
Thus, Egyptian Pound continued to depreciate untill 2015 to 2017 and post which it appreciated largely.
However in black markets in 2016, 1 UsD equalled 9 EGP while official rate being 7 EGP and such depreciation was allowed to be export competitive. However what haooened was excessive exports and trade in black markets by continuing devaluation which extrapoltaed deepening of black markets amd exports became favourite and cheaper in cost amd thus proliferated to highest levels sucj that 1 USD = 18 EGP which then caused inflation to rise 10 percent in Egypt and hence central bank adopted contractionary monetary policy in 2017 year end quarter which caused the Egyptian pound to appreciate as interest rates popped up.
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Use the demand-supply fundamental model to illustrate the changes in the value of the Egyptian pound...
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