Inflation Inertia in Egypt and its Policy Implications
IMF Working Papers, July 1, 2011
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Bibliographic details
- Authors: Kenji Moriyama
- Published: July 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455297733.001
Summary and central findings
- This paper investigates the degree of inflation inertia in Egypt and its determinants using the cross country data consisting of over 100 countries.
- Medium-unbiased estimator of inflation inertia in Egypt is high compared to other countries, as indicated by its location around the upper quartile among the sample.
- The cross country analysis indicates that counter-cyclical macroeconomic policy and fiscal consolidation are a key to reduce inflation inertia and the costs of disinflation.
Determinants and interpretation
- Inflation inertia measured via a medium-unbiased estimator places Egypt near the upper quartile of the sample of over 100 countries.
- Cross-country evidence highlights two policy-related determinants:
- Counter-cyclical macroeconomic policy.
- Fiscal consolidation.
- These determinants are identified as key to reducing:
- Inflation inertia.
- The costs of disinflation.
Policy implications and recommendations
- Adopt counter-cyclical macroeconomic policies to lower inflation inertia.
- Pursue fiscal consolidation to reduce the persistence of inflation and the costs associated with disinflation efforts.
Subject areas and keywords
- Subject: Disinflation, Inflation, Inflation targeting, Monetary policy, Monetary policy frameworks, Output gap, Prices, Production
- Keywords: Disinflation, emerging market, Global, Inflation, inflation expectation, inflation inertia, inflation persistency, Inflation targeting, inflation targeting monetary policy framework, monetary policy, Monetary policy frameworks, Output gap, output gap persistency, shock volatility, WP