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Is Monetary Policy in Egypt Backward or Forward-Looking?

Listed author(s):
  • Amr Sadek HOSNY

The objective of this paper is to test whether monetary policy in Egypt has been backward or forward-looking over the 2002M1-2012M12 period. Using different specifications of a simple Taylor rule, we show that the Central Bank of Egypt (CBE) has become more forward-looking, especially after it formally announced the overnight interbank rate as its main monetary policy instrument in 2005M7. Our empirical results also indicate a significant interest rate smoothing effect and suggest that the exchange rate and the Egyptian revolution of 2011M1 have applied upward pressure on short-term interest rates in Egypt. Our findings also suggest that the CBE is successfully managing the transition towards an effective inflation targeting regime.

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Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 14 (2014)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:14:y:2014:i:2_11
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  1. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
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