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Interest rate policy in Egypt : its role in stabilization and adjustment

Author

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  • Dailami, Mansoor
  • Hinh T. Dinh

Abstract

An appropriate interest rate policy is considered essential to the success of stabilization and adjustment programs that Egypt might undertake. The broad objectives of such a policy would include deregulating credit and investment, raising the interest rate, and developing a"core"short-term debt market to serve as a reference point for market determination of interest rates. And as the government moves away from a regulated environment of controlled credit and regulated investment toward a more liberal system, interest rates will be the prices that guide investment decisions and ensure allocative efficiency. The authors describe some of the structural problems Egypt's economy has faced in the past decade and policy initiatives that the government has undertaken, and review the economy's financial sector. They analyze the role that interest rate policy could play in Egypt's stabilization and adjustment program, particularly how it would affect the outcomes of the important objectives of attracting workers'remittances, encouraging domestic residents to hold deposits in local currency, and increasing investment efficiency. The authors recommend that changes in the level and structure of interest rates be planned in several steps and carried out in conjunction with other adjustment measures, such as reducing the budget deficit, reforming public enterprises, and streamlining public investment.

Suggested Citation

  • Dailami, Mansoor & Hinh T. Dinh, 1991. "Interest rate policy in Egypt : its role in stabilization and adjustment," Policy Research Working Paper Series 655, The World Bank.
    • Handle: RePEc:wbk:wbrwps:655
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    References listed on IDEAS

    as
    1. Martin Feldstein & Lawrence Summers, 1983. "Inflation, Tax Rules, and the Long-term Interest Rate," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 153-185, National Bureau of Economic Research, Inc.
    2. Ortiz, Guillermo, 1983. "Currency Substitution in Mexico: The Dollarization Problem," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(2), pages 174-185, May.
    3. Roe, Alan R., 1982. "High interest rates: a new conventional wisdom for development policy? some conclusions from Sri Lankan experience," World Development, Elsevier, vol. 10(3), pages 211-222, March.
    4. International Monetary Fund, 1983. "Interest Rate Policies in Developing Countries," IMF Occasional Papers 1983/008, International Monetary Fund.
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    Cited by:

    1. Marwa A. Elsherif, 2016. "Exchange Rate Volatility and Central Bank Actions in Egypt: Generalized Autoregressive Conditional Heteroscedasticity Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1209-1216.
    2. Ajay Chhibber & Mansoor Dailami, 1993. "Fiscal Policy and Private Investment in Developing Countries: Recent Evidence on Key Selected Issues," Palgrave Macmillan Books, in: Riccardo Faini & Jaime Melo (ed.), Fiscal Issues in Adjustment in Developing Countries, pages 121-150, Palgrave Macmillan.
    3. Mahmoud Mohieldin & Ahmed Kouchouk, 2003. "On Exchange Rate Policy: The Case of Egypt 1970-2001," Working Papers 0312, Economic Research Forum, revised 04 2003.
    4. Dinh, Hinh T. & Giugale, Marcelo, 1991. "Inflation tax and deficit financing in Egypt," Policy Research Working Paper Series 668, The World Bank.

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