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Inflation In Egypt: Internal Or External Driven?

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  • AMR HOSNY

    (Department of Economics, University of Wisconsin-Milwaukee, USA)

Abstract

This paper investigates whether internal or external factors explain inflation in Egypt over the period 2003M1–2012M12. Using an autoregressive distributed lag model, results indicate that money supply and global commodity prices affect inflation in the long-run, while important short-run factors are inflation persistence, exchange rate depreciation and supply side bottlenecks. It is also shown that global commodity prices, especially energy prices, pass-through into headline inflation in Egypt with a short lag. These results take into account the different stationary characteristics of different time series variables and are robust to different model specifications. Policy recommendations include the necessity of reforming the government's energy subsidy bill, less monetization of the deficit and gradual liberalization of the currency in order to curb inflationary pressures in Egypt and put the economy on a more sustainable path.

Suggested Citation

  • Amr Hosny, 2013. "Inflation In Egypt: Internal Or External Driven?," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-15.
    • Handle: RePEc:wsi:medjxx:v:05:y:2013:i:03:n:s1793812013500193
    DOI: 10.1142/S1793812013500193
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    References listed on IDEAS

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    1. Ali, Heba, 2011. "Inflation Dynamics: The Case of Egypt," MPRA Paper 36331, University Library of Munich, Germany.
    2. Ilker Domaç & Eray M. Yücel, 2005. "What Triggers Inflation in Emerging Market Economies?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(1), pages 141-164, April.
    3. Mr. Prakash Loungani & Mr. Phillip L Swagel, 2001. "Sources of Inflation in Developing Countries," IMF Working Papers 2001/198, International Monetary Fund.
    4. Bennett T. McCallum & Edward Nelson, 2005. "Monetary and Fiscal Theories of the Price Level: The Irreconcilable Differences," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(4), pages 565-583, Winter.
    5. Frederic S. Mishkin, 1984. "The causes of inflation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 1-32.
    6. Sherine Al-Shawarby & Hoda Selim, 2013. "Are International Food Price Spikes the Source of Egypt’s High Inflation?," Financial and Monetary Policy Studies, in: Marga Peeters & Nidal Sabri & Wassim Shahin (ed.), Financial Integration, chapter 0, pages 61-83, Springer.
    7. Abdullah Almounsor, 2010. "Inflation Dynamics in Yemen: An Empirical Analysis," IMF Working Papers 2010/144, International Monetary Fund.
    8. Hesham Alogeel & Maher Hasan, 2008. "Understanding the Inflationary Process in the GCC Region: The Case of Saudi Arabia and Kuwait," IMF Working Papers 2008/193, International Monetary Fund.
    9. Bonato Leo, 2008. "Money and Inflation in the Islamic Republic of Iran," Review of Middle East Economics and Finance, De Gruyter, vol. 4(1), pages 41-58, January.
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    Cited by:

    1. Kandil Magda & Mirzaie Ida A., 2017. "Iran’s Inflationary Experience: Demand Pressures, External Shocks, and Supply Constraints," Review of Middle East Economics and Finance, De Gruyter, vol. 13(2), pages 1-19, August.
    2. Marwa Elsherif, 2024. "Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 51-69, May.

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