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Using the ARDL bound testing approach to study the inflation rate in Egypt

Author

Listed:
  • Reda Abonazel, Mohamed

    (Cairo University)

  • Elnabawy, Nourhan

    (Cairo University)

Abstract

According to economic theory, the change in any economic variables may affect another economic variable through the time and these changes are not instantaneously, but also over future periods. The Autoregressive distributed lag (ARDL) model has been used for decades to study the relationship between variables using a single equation time series. The ARDL model is one of the most general dynamic unrestricted models in econometric literature. In this model, the dependent variable is expressed by the lag and current values of independent variables and its own lag value. The paper studies the dynamic causal relationships between inflation rate, foreign exchange rate, money supply, and gross domestic product (GDP) in Egypt during the period 2005: Q1 to 2018: Q2. Using the bounds testing approach to cointegration and error correction model, developed within an ARDL model, we investigate whether a long-run equilibrium relationship exists between the inflation rate and three determinants (foreign exchange rate, money supply, and GDP). The results indicate that the exchange rate and the growth in money supply have significant effects on the inflation rate in Egypt, while the real GDP has no significance effect on the inflation rate

Suggested Citation

  • Reda Abonazel, Mohamed & Elnabawy, Nourhan, 2020. "Using the ARDL bound testing approach to study the inflation rate in Egypt," Economic Consultant, Roman I. Ostapenko, vol. 31(3), pages 24-41.
    • Handle: RePEc:ris:statec:0063
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    Citations

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    Cited by:

    1. Moumita Paul & Kalluru Siva Reddy, 2022. "US QE and the Indian Bond Market," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(1), pages 137-157, March.
    2. Amadou Jawo & Mohammed Jebou & Lamin Fatou Bayo, 2023. "The Relationship between Inflation, Exchange Rate, Money Supply and Economic Growth in The Gambia," Technium Social Sciences Journal, Technium Science, vol. 40(1), pages 213-222, February.
    3. Nunoo, Jacob & Abango, Mohammed A & Abreh, Might Kojo, 2023. "Interrogating the drivers of budget credibility dynamics in Ghana’s education sector through the lens of unmitigated spending credibility crisis discourses," SocArXiv ne3cr, Center for Open Science.

    More about this item

    Keywords

    ARDL cointegration; economic growth; error correction model; exchange rate; dynamic causal relationship; money supply;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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