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Has Egypt’s Exchange Rate Policy Changed after the Float?

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  • Hoda Selim

Abstract

The Central Bank of Egypt announced the flotation of the Egyptian Pound in January 2003. Yet, the somewhat stable exchange rate raises questions about its actual role in monetary policy. This paper assesses whether exchange policy significantly changed after the float. It first applies cointegration methodology using monthly data from 1981 to 2008 to show that there is a long-run relationship between the LE/US$ exchange rate and monetary fundamentals. A vector error-correction model shows that the speed of exchange rate adjustment to long-run equilibrium is slow and that there has not been a significant change in exchange rate determination after the float. Finally, Egypt’s de facto exchange rate regime could be classified as “fixed” for several years after the de jure float was announced.

Suggested Citation

  • Hoda Selim, 2012. "Has Egypt’s Exchange Rate Policy Changed after the Float?," Middle East Development Journal, Taylor & Francis Journals, vol. 4(1), pages 1250005-121, January.
    • Handle: RePEc:taf:rmdjxx:v:4:y:2012:i:1:p:1250005-1-1250005-27
    DOI: 10.1142/S1793812012500058
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    1. Heidi Aly & Rana Hosni, 2018. "Examining the nexus between exchange rate volatility and export performance: Empirical evidence from the Egyptian experience," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(3), pages 542-560, June.
    2. Brixiova Zuzana & Egert Balazs & Essid Thouraya Hadj Amor, 2014. "The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia," Review of Middle East Economics and Finance, De Gruyter, vol. 10(1), pages 1-27, April.
    3. Zuzana Brixiova & Balázs Égert & Thouraya Hadj Amor Essid, 2013. "Working Paper 187 - The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia," Working Paper Series 991, African Development Bank.

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