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Inflation and Growth in Egypt: is there a Threshold Effect?

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  • Hala Abou-Ali
  • Hanaa Kheir-El-Din

Abstract

This paper addresses the relationship between inflation and growth in Egypt for the last quarter century. Two distinct sub-periods are observed: somewhat higher and more volatile GDP growth rate is associated with higher inflation prior to 1990/1991; from this year onwards, lower and less volatile growth is associated with significantly lower inflation. It was found that the impact of inflation on GDP growth is not significantly different between the two periods. Testing for non-linear effects of inflation on growth in Egypt, it appears that there is no threshold of inflation, beyond which it is harmful to growth. To the contrary, the findings suggest that inflation at any level negatively impacts economic growth. It is thus beneficial to focus monetary policy towards maintaining price stability.

Suggested Citation

  • Hala Abou-Ali & Hanaa Kheir-El-Din, 2009. "Inflation and Growth in Egypt: is there a Threshold Effect?," Middle East Development Journal, Taylor & Francis Journals, vol. 1(1), pages 59-78, January.
    • Handle: RePEc:taf:rmdjxx:v:1:y:2009:i:1:p:59-78
    DOI: 10.1142/S179381200900005x
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    Cited by:

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    2. Joseph Magnus Frimpong & Eric Fosu Oteng-Abayie, 2010. "When is Inflation Harmful? Estimating the Threshold Effect for Ghana," American Journal of Economics and Business Administration, Science Publications, vol. 2(3), pages 232-239, September.

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