The Monetary Transmission Mechanism in Egypt

45 Pages Posted: 27 Dec 2007

See all articles by Andreas Billmeier

Andreas Billmeier

International Monetary Fund (IMF) - Middle East and Central Asia Department

Rania Al-Mashat

International Monetary Fund (IMF)

Date Written: December 2007

Abstract

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.

Keywords: Monetary policy, Egypt, Arab Republic of, Inflation targeting, Exchange rates

Suggested Citation

Billmeier, Andreas and Al-Mashat, Rania, The Monetary Transmission Mechanism in Egypt (December 2007). IMF Working Papers, Vol. , pp. 1-43, 2007. Available at SSRN: https://ssrn.com/abstract=1078790

Andreas Billmeier (Contact Author)

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Rania Al-Mashat

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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