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

Author/Editor: Elif Arbatli ; Kenji Moriyama
Publication Date: May 01, 2011
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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 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. 11/108
Subject(s): Economic models | Spillovers

Publication Date: May 01, 2011
ISBN/ISSN: 9781455261376/1018-5941 Format: Paper
Stock No: WPIEA2011108 Pages: 40
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