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Is Monetary Policy in Egypt Backward or Forward-Looking?

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  • Amr Sadek Hosny

    (International Monetary Fund)

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.

Suggested Citation

  • Amr Sadek Hosny, 2014. "Is Monetary Policy in Egypt Backward or Forward-Looking?," Working Papers 846, Economic Research Forum, revised Oct 2014.
    • Handle: RePEc:erg:wpaper:846
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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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    JEL classification:

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

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