Inflation and Education Expenditure: Evidence from Egypt

Abstract

For Egypt, there are no previous studies, at any time, that investigate the impact ‎of changes in inflation on education expenditure. ‎In addition, previous studies do not handle endogeneity while estimating the inflation-education expenditure model. Therefore, this paper empirically investigates the relationship between inflation and education expenditure in Egypt (1976-2019). Correcting for the potential endogeneity, the GMM model has been conducted. Our findings reveal that inflation plays a fundamental role in explaining education expenditure per student in Egypt. That is, rising inflation has a deleterious effect on education expenditure. Moreover, there is no significant crowding-out effect among education expenditure and the rival expenditure programs in the Egyptian government’s budget. Finally, we suggest policymakers to keep inflation rates low to avoid their deleterious effects on education expenditure.

Keywords: Education expenditure, Inflation, Egypt, Kapetanios unit root test, Structural breaks

DOI: 10.7176/JESD/13-4-07

Publication date: February 28^th 2022