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The Sources of Inflation in Egypt: A Multivariate Co-integration Analysis

Author

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  • El-Sakka M. I. T.

    (Kuwait University)

  • Ghali Khalifa H

    (Kuwait University)

Abstract

The aim of this paper is to empirically investigate the sources of inflation in Egypt. For this, price dynamics is herein represented by a vector error-correction model, which we use to test for the existence of a long-run relationship between the consumer price index, real gross domestic product (GDP), the exchange rate, interest rate, money supply and world prices. Then using the augmented VAR approach, we test for Granger non-causality between the different variables and inflation. The main results that are of interest to monetary policy in Egypt suggest that structural reforms based on improving the country’s productive capacity, shrinking the budget deficit and credit to the government, are crucial for controlling inflation.

Suggested Citation

  • El-Sakka M. I. T. & Ghali Khalifa H, 2005. "The Sources of Inflation in Egypt: A Multivariate Co-integration Analysis," Review of Middle East Economics and Finance, De Gruyter, vol. 3(3), pages 84-96, December.
    • Handle: RePEc:bpj:rmeecf:v:3:y:2005:i:3:n:6
    DOI: 10.2202/1475-3693.1046
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    References listed on IDEAS

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    1. Calvo, Guillermo A. & Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Targeting the real exchange rate: theory and evidence," Journal of Development Economics, Elsevier, vol. 47(1), pages 97-133, June.
    2. Boswijk, Peter & Franses, Philip Hans, 1992. "Dynamic Specification and Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 369-381, August.
    3. Mr. Marco Terrones & Mr. Luis Catão, 2001. "Fiscal Deficits and Inflation: A New Look at the Emerging Market Evidence," IMF Working Papers 2001/074, International Monetary Fund.
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    Cited by:

    1. Dekkiche Djamal, 2022. "Impact of Money Supply on Inflation Rate in Egypt: A VECM Approach," Economics and Business, Sciendo, vol. 36(1), pages 134-148, January.
    2. El Baz, Osama, 2014. "The Determinants of Inflation in Egypt: An Empirical Study (1991-2012)," MPRA Paper 56978, University Library of Munich, Germany.
    3. Mohamed A. Osman & Rosmy Jean Louis & Faruk Balli, 2009. "Output gap and inflation nexus: the case of United Arab Emirates," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 1(1), pages 118-135.
    4. Sherine Al-Shawarby & Hoda Selim, 2013. "Are International Food Price Spikes the Source of Egypt’s High Inflation?," Financial and Monetary Policy Studies, in: Marga Peeters & Nidal Sabri & Wassim Shahin (ed.), Financial Integration, chapter 0, pages 61-83, Springer.
    5. Jalil, Abdul & Tariq, Rabbia & Bibi, Nazia, 2014. "Fiscal deficit and inflation: New evidences from Pakistan using a bounds testing approach," Economic Modelling, Elsevier, vol. 37(C), pages 120-126.
    6. Noha EMARA, 2016. "Estimating Aggregate Demand in Egypt," Journal of Economics and Political Economy, KSP Journals, vol. 3(1), pages 50-64, March.

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