Independence of Central Bank of Egypt and Exchange Rate Regimes

In this chapter, we assess macroeconomic independence using the prices of goods and services and short-term interest rates throughout a range of time periods categorized by alternative exchange rate regimes. To assess how well-floating exchange rates have increased Egypt’s macroeconomic independence from the European Union (EU) and the United States (US), the ARDL model (autoregressive distributed lag) or Bounds Test has been devised. We examine a number of hypotheses concerning global transmission, interest rate and price movement, and international trade using this empirical methodology. According to the findings, Egypt’s products market and monetary policy are, over the long term, completely independent from those of base regions like the European Union and the United States. Because of this, the Central Bank of Egypt (CBE) may decide its plan of action (policy direction) and define its goals without being impacted by shocks from the EU and the US.