Asymmetric Impact of Real Effective Exchange Rate Changes on Domestic Output Revisited: Evidence from Egypt

Mesbah Sharaf and Abdelhalem Shahen ()

No 2022-6, Working Papers from University of Alberta, Department of Economics

Abstract: The Egyptian pound has undergone substantial devaluations over the past five years. The Central Bank of Egypt aimed through these currency devaluations to stimulate domestic output. In this paper, we investigate the asymmetric impact of the real effective exchange rate (REER) on Egypt's real domestic output from 1960 to 2020 using a Nonlinear Autoregressive Distributed Lag (NARDL) model. The analyses account for the various channels via which the REER would affect domestic output. Results show evidence of a long-run asymmetry in the output effect of REER changes in which only real currency depreciations have a contractionary impact on output, while the REER has no impact on output in the short run. The Egyptian monetary authority cannot rely on domestic currency depreciation as a policy instrument to boost domestic output.

Keywords: Asymmetric effects; Domestic output; Egypt; ARDL; Real effective exchange rate (search for similar items in EconPapers)
JEL-codes: E63 F31 F41 F62 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2022-03-24
New Economics Papers: this item is included in nep-ara, nep-fdg, nep-mac, nep-mon, nep-opm and nep-ore
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Journal Article: Asymmetric impact of real effective exchange rate changes on domestic output revisited: evidence from Egypt (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2022_006

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