IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/36331.html
   My bibliography  Save this paper

Inflation Dynamics: The Case of Egypt

Author

Abstract

Inflation as a phenomenon has witnessed remarkable changes starting from mid-eighties of the last century. Inflation rates have become less persistent, less responsive to supply side shocks. In addition, the relative importance of demand pull inflation as one of the major determinants of inflation has decreased due to efficient monetary policies that have been adopted by central banks all over the world to reduce inflation based on anchoring inflation expectations. Moreover, the slope of Phillips curve has flattened as many factors have appeared to be more influential on inflation rather than output gap, namely inflation expectations. These changes constitute in the new economic literature what so called “Inflation Dynamics”. In this context, this study focuses on analyzing inflation dynamics in Egypt in (1980-2009) in order to identify to what extent “Inflation Dynamics” in Egypt is different from or similar to those witnessed globally. The study applied a Vector Auto Regressive model (VAR) and other econometrics models to analyze “Inflation Dynamics” in Egypt in three sub periods: the 1980s, the 1990s and the first decade of the new millennium. The study concluded that Inflation Dynamics in Egypt is completely different from those observed globally. Inflation rates in Egypt have become more persistent especially starting from 2000; Inflation shocks are now lasting longer and have a long-term impact on the future inflation paths. On the other hand, demand bull inflation still considers one of the most important inflation determinants, as it is solely responsible for explaining 30% of the changes in inflation rates. In addition, the study confirmed that inflation rates in Egypt have become more responsive to supply side shocks starting from 2006. As for the slope of Phillips curve, the study confirmed that similar to the changes observed globally, the slope of Phillips Curve for the Egypt economy has flattened reflecting the increasing importance of other inflation determinants rather than output gap.

Suggested Citation

  • Ali, Heba, 2011. "Inflation Dynamics: The Case of Egypt," MPRA Paper 36331, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36331
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/36331/1/MPRA_paper_36331.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrew T. Levin & Jeremy M. Piger, 2003. "Is inflation persistence intrinsic in industrial economies?," Working Papers 2002-023, Federal Reserve Bank of St. Louis.
    2. John M. Roberts, 2006. "Monetary Policy and Inflation Dynamics," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.
    2. 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.
    3. Yaya O. S. & Akintande O. J. & Ogbonna A. E. & Adegoke H. M., 2019. "Cpi Inflation In Africa: Fractional Persistence, Mean Reversion And Nonlinearity," Statistics in Transition New Series, Polish Statistical Association, vol. 20(3), pages 119-132, September.
    4. Touny, Mahmoud, 2013. "Investigate the Long-Run Trade-Off between Inflation and Unemployment in Egypt," MPRA Paper 54561, University Library of Munich, Germany.
    5. repec:exl:29stat:v:20:y:2019:i:3:p:119- is not listed on IDEAS
    6. Sarra Majoul Smaili & Mohamed safouane Ben aissa, 2018. "Exchange rate passthrough to domestic prices in some MENA countries," Economics Bulletin, AccessEcon, vol. 38(2), pages 1028-1037.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kevin Lansing, 2009. "Time Varying U.S. Inflation Dynamics and the New Keynesian Phillips Curve," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(2), pages 304-326, April.
    2. Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2008. "The New Keynesian Phillips Curve: From Sticky Inflation to Sticky Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 667-699, June.
    3. James H. Stock & Mark W. Watson, 2010. "Modeling inflation after the crisis," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 173-220.
    4. Denise R. Osborn & Marianne Sensier, 2009. "Uk Inflation: Persistence, Seasonality And Monetary Policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(1), pages 24-44, February.
    5. Gbaguidi, David, 2012. "La courbe de Phillips : temps d’arbitrage et/ou arbitrage de temps," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(1), pages 87-119, mars.
    6. Dieppe, Alistair & Ortega, Eva & D'Agostino, Antonello & Karlsson, Tohmas & Benkovskis, Konstantins & Caivano, Michele & Hurtado, Samuel & Várnai, Tímea, 2011. "Assessing the sensitivity of inflation to economic activity," Working Paper Series 1357, European Central Bank.
    7. Fuhrer, Jeffrey C., 2010. "Inflation Persistence," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 9, pages 423-486, Elsevier.
    8. Alberto Musso & Livio Stracca & Dick van Dijk, 2009. "Instability and Nonlinearity in the Euro-Area Phillips Curve," International Journal of Central Banking, International Journal of Central Banking, vol. 5(2), pages 181-212, June.
    9. Frederic S. Mishkin, 2007. "Inflation Dynamics," International Finance, Wiley Blackwell, vol. 10(3), pages 317-334, December.
    10. Gbaguidi DAVID, 2011. "Expectations Impact On The Effectiveness Of The Inflation-Real Activity Trade-Off," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 2(2), pages 141-181.
    11. Stephen G. Cecchetti & Peter Hooper & Bruce C. Kasman & Kermit L. Schoenholtz & Mark W. Watson, 2007. "Understanding the Evolving the Evolving Inflation Process," Working Papers 2007-4, Princeton University. Economics Department..
    12. Gbaguidi, David Sedo, 2011. "Regime Switching in a New Keynesian Phillips Curve with Non-zero Steady-state Inflation Rate," MPRA Paper 35481, University Library of Munich, Germany.
    13. Jan Babecký & Fabrizio Coricelli & Roman Horváth, 2009. "Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(2), pages 102-127, June.
    14. Craig S. Hakkio, 2009. "Global inflation dynamics," Research Working Paper RWP 09-01, Federal Reserve Bank of Kansas City.
    15. Sharon Kozicki & Peter A. Tinsley, 2002. "Alternative sources of the lag dynamics of inflation," Research Working Paper RWP 02-12, Federal Reserve Bank of Kansas City.
    16. Punnoose Jacob & Thomas van Florenstein Mulder, 2019. "The flattening of the Phillips curve: Rounding up the suspects," Reserve Bank of New Zealand Analytical Notes series AN2019/06, Reserve Bank of New Zealand.
    17. Maarten Dossche, 2009. "Understanding Inflation Dynamics.Where Do We Stand?," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(2), pages 209-227.
    18. Ravn, Morten O. & Schmitt-Grohe, Stephanie & Uribe, Martín & Uuskula, Lenno, 2010. "Deep habits and the dynamic effects of monetary policy shocks," Journal of the Japanese and International Economies, Elsevier, vol. 24(2), pages 236-258, June.
    19. Robalo Marques, Carlos, 2004. "Inflation persistence: facts or artefacts?," Working Paper Series 371, European Central Bank.
    20. Konstantin Styrin & Oleg Zamulin, 2012. "A Real Exchange Rate Based Phillips Curve," Working Papers w0179, New Economic School (NES).

    More about this item

    Keywords

    Inflation; Inflation dynamics; Inflation persistence; The Egyptian economy; Demand-pull inflation; Cost-push inflation; Inflation expectations; markets and prices rigidities; Phillips curve; Government debt; Monetary policies; Vector Auto Regression (VAR);
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36331. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.