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The Monetary Targeting Regime in Egypt: Theoretical and Empirical Investigations

  • Ibrahim L. Awad

The objective of this paper is to answer the following question: can the central bank of Egypt achieve the goal of price stability under the currently applied monetary targeting regime? The answer depends on whether or not the demand for money function is stable in Egypt. Using quarterly data on the period 1995-2007, the study estimated the long run demand for money function in Egypt. By testing its stability for structural change, the demand for money function is found instable. Thus, the study concludes that the central bank of Egypt cannot achieve price stability under the currently applied monetary targeting regime.

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Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Studies.

Volume (Year): (2010)
Issue (Month): 1 ()
Pages: 150-164

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Handle: RePEc:bas:econst:y:2010:i:1:p:150-164
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  1. Mehra, Yash P, 1993. "The Stability of the M2 Demand Function: Evidence from an Error-Correction Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 455-60, August.
  2. Rania A. Al-Mashat & Andreas Billmeier, 2007. "The Monetary Transmission Mechanism in Egypt," IMF Working Papers 07/285, International Monetary Fund.
  3. Marvin Goodfriend, 2008. "The Case for Price Stability with a Flexible Exchange Rate in the New Neoclassical Synthesis," Cato Journal, Cato Journal, Cato Institute, vol. 28(2), pages 247-254, Winter.
  4. Hetzel, Robert L, 1984. "Estimating Money Demand Functions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(2), pages 185-93, May.
  5. Hallman, Jeffrey J & Porter, Richard D & Small, David H, 1991. "Is the Price Level Tied to the M2 Monetary Aggregate in the Long Run?," American Economic Review, American Economic Association, vol. 81(4), pages 841-58, September.
  6. Ibrahim L. Awad, 2009. "Did Egypt Satisfy Prerequisites for an it Regime?," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2009(6), pages 63-80.
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