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Estimating a Small Open-Economy Model for Egypt; Spillovers, Inflation Dynamics, and Implications for Monetary Policy

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  • Elif C Arbatli
  • Kenji Moriyama

Abstract

This paper estimates a small open economy model for Egypt to analyze inflation, output dynamics and monetary policy during 2005-2010. The interest rate channel is found to be relatively weak in Egypt, complicating the use of interest rates as the immediate target of monetary policy. However, the paper also finds a significant level of persistence in the policy rate, making monetary policy pro-cyclical. More active use of interest rate policy, measures to improve domestic debt markets and a gradual move towards inflation targeting can help support a successful disinflation strategy for Egypt.

Suggested Citation

  • Elif C Arbatli & Kenji Moriyama, 2011. "Estimating a Small Open-Economy Model for Egypt; Spillovers, Inflation Dynamics, and Implications for Monetary Policy," IMF Working Papers 11/108, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/108
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    References listed on IDEAS

    as
    1. Al-Mashat Rania & Billmeier Andreas, 2008. "The Monetary Transmission Mechanism in Egypt," Review of Middle East Economics and Finance, De Gruyter, pages 32-82.
    2. Roberto Garcia-Saltos & Douglas Laxton & Michal Andrle & Haris Munandar & Charles Freedman & Danny Hermawan, 2009. "Adding Indonesia to the Global Projection Model," IMF Working Papers 09/253, International Monetary Fund.
    3. International Monetary Fund, 2009. "Adding Latin America to the Global Projection Model," IMF Working Papers 09/85, International Monetary Fund.
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    Cited by:

    1. Abouwafia, Hashem E. & Chambers, Marcus J., 2015. "Monetary policy, exchange rates and stock prices in the Middle East region," International Review of Financial Analysis, Elsevier, vol. 37(C), pages 14-28.
    2. Javier G. Gómez-Pineda & Dominique Guillaume & Kadir Tanyeri, 2015. "Systemic Risk, Aggregate Demand, and Commodity Prices," BORRADORES DE ECONOMIA 013327, BANCO DE LA REPÚBLICA.
    3. Javier Gómez‐Pineda & Dominique M. Guillaume & Kadir Tanyeri, 2015. "Systemic Risk, Aggregate Demand, and Commodity Prices," IMF Working Papers 15/165, International Monetary Fund.

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