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Is Monetary Policy in Egypt Backward or Forward-Looking?

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  • Amr Sadek HOSNY

Abstract

The objective of this paper is to test whether monetary policy in Egypt has been backward or forward-looking over the 2002M1-2012M12 period. Using different specifications of a simple Taylor rule, we show that the Central Bank of Egypt (CBE) has become more forward-looking, especially after it formally announced the overnight interbank rate as its main monetary policy instrument in 2005M7. Our empirical results also indicate a significant interest rate smoothing effect and suggest that the exchange rate and the Egyptian revolution of 2011M1 have applied upward pressure on short-term interest rates in Egypt. Our findings also suggest that the CBE is successfully managing the transition towards an effective inflation targeting regime.

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  • Amr Sadek HOSNY, 2014. "Is Monetary Policy in Egypt Backward or Forward-Looking?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(2).
    • Handle: RePEc:eaa:aeinde:v:14:y:2014:i:2_11
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    Cited by:

    1. El Baz, Osama, 2014. "The Determinants of Inflation in Egypt: An Empirical Study (1991-2012)," MPRA Paper 56978, University Library of Munich, Germany.

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    More about this item

    Keywords

    Taylor rules; Egypt; inflation targeting.;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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