The Monetary Transmission Mechanism in Egypt
December 1, 2007
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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.
Subject: Currency markets, Deposit rates, Exchange rates, Monetary aggregates, Monetary stance
Keywords: interest rate channel, lending rate, monetary policy stance, private sector, U.S. dollar, WP
Pages:
43
Volume:
2007
DOI:
Issue:
285
Series:
Working Paper No. 2007/285
Stock No:
WPIEA2007285
ISBN:
9781451868487
ISSN:
1018-5941
