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Estimating a Small Open-Economy Model for Egypt: Spillovers, Inflation Dynamics, and Implications for Monetary Policy

Author

Listed:
  • Ms. Elif C Arbatli Saxegaard
  • Mr. Kenji Moriyama
Abstract
This paper estimates a small open economy model for Egypt to analyze inflation, output dynamics and monetary policy during 2005-2010. The interest rate channel is found to be relatively weak in Egypt, complicating the use of interest rates as the immediate target of monetary policy. However, the paper also finds a significant level of persistence in the policy rate, making monetary policy pro-cyclical. More active use of interest rate policy, measures to improve domestic debt markets and a gradual move towards inflation targeting can help support a successful disinflation strategy for Egypt.

Suggested Citation

  • Ms. Elif C Arbatli Saxegaard & Mr. Kenji Moriyama, 2011. "Estimating a Small Open-Economy Model for Egypt: Spillovers, Inflation Dynamics, and Implications for Monetary Policy," IMF Working Papers 2011/108, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/108
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    References listed on IDEAS

    as
    1. Al-Mashat Rania & Billmeier Andreas, 2008. "The Monetary Transmission Mechanism in Egypt," Review of Middle East Economics and Finance, De Gruyter, vol. 4(3), pages 32-82, September.
    2. Jonathan McCarthy, 2007. "Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies," Eastern Economic Journal, Eastern Economic Association, vol. 33(4), pages 511-537, Fall.
    3. International Monetary Fund, 2011. "Bangladesh: Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 2011/314, International Monetary Fund.
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    5. Mr. Roberto Garcia-Saltos & Mr. Douglas Laxton & Michal Andrle & Haris Munandar & Charles Freedman & Danny Hermawan, 2009. "Adding Indonesia to the Global Projection Model," IMF Working Papers 2009/253, International Monetary Fund.
    6. International Monetary Fund, 2010. "Republic of Estonia: Staff Report for the 2009 Article IV Consultation," IMF Staff Country Reports 2010/004, International Monetary Fund.
    7. International Monetary Fund, 2009. "Adding Latin America to the Global Projection Model," IMF Working Papers 2009/085, International Monetary Fund.
    8. International Monetary Fund, 2011. "Chile: Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 2011/260, International Monetary Fund.
    9. International Monetary Fund, 2010. "Peru: Staff Report for the 2010 Article IV Consultation," IMF Staff Country Reports 2010/098, International Monetary Fund.
    10. International Monetary Fund, 1999. "Colombia: Staff Report for the 1999 Article IV Consultation," IMF Staff Country Reports 1999/149, International Monetary Fund.
    11. International Monetary Fund, 2011. "Dominica: Staff Report for the 2011 Article IV consultation," IMF Staff Country Reports 2011/324, International Monetary Fund.
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    Cited by:

    1. Javier Gómez-Pineda & Mr. Dominique M. Guillaume & Kadir Tanyeri, 2015. "Systemic Risk, Aggregate Demand, and Commodity Prices," IMF Working Papers 2015/165, International Monetary Fund.
    2. Mr. Kenji Moriyama, 2011. "Inflation Inertia in Egypt and its Policy Implications," IMF Working Papers 2011/160, International Monetary Fund.
    3. Abouwafia, Hashem E. & Chambers, Marcus J., 2015. "Monetary policy, exchange rates and stock prices in the Middle East region," International Review of Financial Analysis, Elsevier, vol. 37(C), pages 14-28.

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