Estimating a Small Open-Economy Model for Egypt: Spillovers, Inflation Dynamics, and Implications for Monetary Policy
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Summary:
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.
Series:
Working Paper No. 2011/108
Subject:
Exchange rates Financial services Foreign exchange Inflation Output gap Prices Production Real exchange rates Real interest rates
English
Publication Date:
May 1, 2011
ISBN/ISSN:
9781455261376/1018-5941
Stock No:
WPIEA2011108
Pages:
40
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