Towards Inflation Targeting in Egypt Fiscal and Institutional Reforms to Support Disinflation Effort

Youssef, Hoda Abdel-Ghaffar

doi:10.2139/ssrn.1715379

Cited by 6 publications

(8 citation statements)

References 10 publications

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“…The inflation rate began falling gradually over the 1990s because of the reform program's implementation. On the side of public finance, the fiscal deficit decreased significantly from 15.2 percent of the GDP at the beginning of the decade to 6.4 percent of the GDP in 1992, afterward, it gradually decreased to 0.9 percent of the GDP in 1997 (Youssf, 2007). The decrease of the fiscal deficit could be attributed to Paris Club, as it wrote off approximately half of Egypt's debt in 1991.…”

Section: The Economic Reform and Structural Adjustmentmentioning

confidence: 99%

Analyzing the relationship between Fiscal Deficit and Inflation: The Case of Egypt

Abdu¹

2022

المجلة العلمیة للإقتصاد و التجارة

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For decades, Egypt has had a chronic fiscal deficit and high inflation problem. Recently, both variables have been trending downward due to COVID-19 and the implementation of the economic reform programme in 2016. This study reinvestigates the relationship between the fiscal deficit and inflation from 1981 to 2020 using the Vector Error Correction Model (VECM) and the Granger causality test. The results indicate that fiscal deficit has a significant effect on inflation in the long run, as the increase in fiscal deficit increases the inflation rate. The results of the Granger causality test reveal a two-way causality relationship between fiscal deficit and inflation in the short run. This relationship is captured through the causal effect of money supply on the inflation rate and the interest rate. The interest rate also affects the fiscal deficit which eventually affects the inflation rate. On the other hand, the interest rate does not seem to affect the inflation rate in the short run. These results indicate that the problem of inflation in Egypt seems to be a fiscal rather than a monetary phenomenon. Breaking the vicious circle of the fiscal deficit, money supply growth, and the interest rate represents a critical factor in dealing with Egypt's inflation and fiscal deficit.

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Section: The Economic Reform and Structural Adjustmentmentioning

confidence: 99%

Analyzing the relationship between Fiscal Deficit and Inflation: The Case of Egypt

Abdu¹

2022

المجلة العلمیة للإقتصاد و التجارة

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“…62-64). As a result, inflation rates came down due to the implementation of the ERSAP Elshamy (2012), Youssef (2007)]. At the end of the 1996 stabilization program, the CBE was preoccupied with attaining numerous objectives simultaneously, some of which were incompatible.…”

Section: Background Of the Egyptian Economy And Its Monetary Policymentioning

confidence: 99%

The Taylor Rule in Egypt: Is it Optimal? Is there Equilibrium Determinacy?

Maher¹,

Zhao²,

Tang³

2022

Journal of Economic Integration

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We investigate Egypt's Taylor rule (interest rate targeting) between 1976 and 2019 by including the main economic variables in its reaction function. Using the Taylor principle, we investigate Egypt’s monetary policy optimality. To this end, we conduct the generalized method of moments (GMM) estimation procedure with different Taylor rule specifications to deal with potential endogeneity among variables. Our GMM estimates reveal that the partial adjustment coefficient is of considerable magnitude, indicating the explanatory power of policy inertia on many total variations in the current values of the nominal interest rate in Egypt. Furthermore, the inflation gap coefficient violates the Taylor principle, making the policy procyclical and inflation "spiral" and inducing divergence from the long-run equilibrium. Therefore, Egypt's Taylor rule, and thus monetary policy, reflects the indeterminacy of equilibrium and is a passive and destabilizing policy. Besides, the output gap coefficient was unexpectedly found to be insignificant.

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“…However, the lack of credibility in this new system and public expectations of a further drastic devaluation led to a severe shortage of foreign exchange. As a result, the Egyptian pound depreciated and lost 50 per cent of its value (Youssef, 2007). The inflation rates have increased significantly due to high ERPT of Egyptian pound depreciation.…”

Section: From January 2002 To December 2004mentioning

confidence: 99%

“…The high ERPT is a point of concern for developing countries which consider adopting an inflation targeting regime. This is due to the risk of seeing the exchange rate becoming the main objective of the central bank, thus dominating the supposed primary objective of the monetary authorities, which is the inflation rate (Youssef, 2007).…”

Section: Introductionmentioning

confidence: 99%

Towards inflation targeting in Egypt: the relationship between exchange rate and inflation

Khodeir

2012

SAJEMS

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Since the Egyptian economy has recently moved towards inflation targeting, it became very important to know whether exchange rate movements have serious inflationary implications or not. To investigate this subject, the study aims to analyse the relevance of inflation with the exchange rate by using the Grangercausality test. Two indicators of inflation will be used, the consumer price index (CPI) and wholesale price index (WPI). In general, the results show a strong relationship between the two variables in a way that may give support to the application of 'flexible inflation targeting regime instead of strict inflation targeting regime'.

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Towards Inflation Targeting in Egypt Fiscal and Institutional Reforms to Support Disinflation Effort

Cited by 6 publications

References 10 publications

Analyzing the relationship between Fiscal Deficit and Inflation: The Case of Egypt

Analyzing the relationship between Fiscal Deficit and Inflation: The Case of Egypt

The Taylor Rule in Egypt: Is it Optimal? Is there Equilibrium Determinacy?

Towards inflation targeting in Egypt: the relationship between exchange rate and inflation

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