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Uncovering the Financial Effects of the Exchange Rate Regime Transition in Egypt

Author

Listed:
  • Karen Davtyan

    (Departament d'Economia Aplicada, Universitat Autònoma de Barcelona (UAB))

  • Omar Elkaraksy

    (Departament d'Economia Aplicada, Universitat Autònoma de Barcelona (UAB))

Abstract

We evaluate the financial effects of monetary policy over the transition period from a fixed to a floating exchange rate regime in Egypt. The baseline evaluation is implemented through an event study methodology (high frequency identification) by estimating the effects of monetary policy announcements on financial indicators. The results reveal that a currency devaluation leads to a significant increase in stock prices. A change in the monetary policy interest rate significantly affects treasury yields. It takes more time for treasury yields with longer maturities to reflect the effects of monetary policy announcements. The results are mainly driven by the period when the exchange rate regime was closer to a floating system. The results also highlight the importance of politically and economically stable environment for the efficient transmission of monetary policy.

Suggested Citation

  • Karen Davtyan & Omar Elkaraksy, 2024. "Uncovering the Financial Effects of the Exchange Rate Regime Transition in Egypt," Working Papers wpdea2407, Department of Applied Economics at Universitat Autonoma of Barcelona.
    • Handle: RePEc:uab:wprdea:wpdea2407
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    References listed on IDEAS

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    Keywords

    monetary policy; financial markets; exchange rate regime; developing economy; Egypt;
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