The Monetary Transmission Mechanism in Egypt

Author/Editor:

Rania A. Al-Mashat ; Andreas Billmeier

Publication Date:

December 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines the monetary transmission mechanism in Egypt against the background of the central bank's intention to shift to inflation targeting. It first describes the changing transmission channels over the last decade. Second, the channels are evaluated in a VAR model. The exchange rate channel plays a strong role in propagating monetary shocks to output and prices. Most other channels (bank lending, asset price) are rather weak. The interest rate channel is underdeveloped but appears to be strengthening since the introduction of the interest corridor in 2005, which bodes well for adopting inflation targeting over the medium term.

Series:

Working Paper No. 2007/285

Subject:

Currency markets Deposit rates Exchange rates Monetary aggregates Monetary stance

English

Publication Date:

December 1, 2007

ISBN/ISSN:

9781451868487/1018-5941

Stock No:

WPIEA2007285

Pages:

43

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