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Has Egypt'S Exchange Rate Policy Changed After The Float?

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  • HODA SELIM

    ()
    (Economic Research Forum, 21, Al-Sad Al-Aaly St, Dokki, Giza, Egypt)

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    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.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Middle East Development Journal.

    Volume (Year): 04 (2012)
    Issue (Month): 01 ()
    Pages: 1250005-1-1250005-27

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    Handle: RePEc:wsi:medjxx:v:04:y:2012:i:01:p:1250005-1-1250005-27

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    Related research

    Keywords: Exchange rate determination; cointegration; de facto classification; monetary policy; Egypt;

    References

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    1. MacDonald, Ronald & Taylor, Mark P., 1994. "The monetary model of the exchange rate: long-run relationships, short-run dynamics and how to beat a random walk," Journal of International Money and Finance, Elsevier, vol. 13(3), pages 276-290, June.
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    15. Kamar Bassem & Bakardzhieva Damyana, 2005. "Economic Trilemma and Exchange Rate Management in Egypt," Review of Middle East Economics and Finance, De Gruyter, vol. 3(2), pages 1-24, August.
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    17. Smith, P N & Wickens, M R, 1986. "An Empirical Investigation into the Causes of Failure of the Monetary Model of the Exchange Rate," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(2), pages 143-62, April.
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    Cited by:
    1. Brixiova, Zuzana & Égert, Balázs & Hadj Amor Essid, Thouraya, 2013. "The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia," IZA Discussion Papers 7822, Institute for the Study of Labor (IZA).
    2. 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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