The Nexus between Inflation Rate and Monetary Policy in Egypt

Document Type : Original Article

Authors

National Planning Institute

Abstract

This study examines the factors influencing inflation dynamics in Egypt, particularly amidst the successive crises facing the world, and offers an attempt to evaluate the monetary policy of the Central Bank of Egypt, which aims to reduce the high inflation rate in the country. The study uses the Autoregressive Distributed Lags (ARDL) model to assess the impact of using monetary policy tools on the inflation rate in Egypt (quarterly data for the period 2017-2021). It then suggests some tools to increase the effectiveness of the inflation-targeting monetary policy. The results indicate that the most significant factors affecting inflation in Egypt during the study period are the lagged values of inflation, interest rate decisions, gross domestic product (GDP), nominal exchange rate, money supply, and changes in relative prices. This implies that the factors leading to an increase in the inflation rate are not limited to the demand side alone but extend to include aspects of supply and monetary policy tools used in previous periods. The paper also discusses the impact of these tools on the process of absorbing excess liquidity from the economy and thereby curbing the inflation rate. The study concludes that effective strategies to mitigate inflation must include both monetary and fiscal policy tools.

Highlights

 

Keywords

Full Text

 

References

 

Files

Share

How to cite

Statistics