Asymmetric Effects of Exchange Rates and Oil Prices on Inflation in Egypt

Ahmed Mohamed Kamara (), Mohamed A. M. Sallam () and Ehab Ebrahim Mohamed Ebrahim ()
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Ahmed Mohamed Kamara: Department of Economics, Faculty of Commerce, Kafr Elsheikh University, Egypt
Mohamed A. M. Sallam: Department of Economics, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh, Saudi Arabia
Ehab Ebrahim Mohamed Ebrahim: Department of Economics, Faculty of Commerce, Kafr Elsheikh University, Egypt; & Department of Economics, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh, Saudi Arabia

International Journal of Energy Economics and Policy, 2025, vol. 15, issue 3, 486-497

Abstract: This study aimed to examine the asymmetric effects of exchange rates and oil prices on inflation in Egypt using the nonlinear autoregressive distributed lag (NARDL) model. Relying on annual data during the period (1975-2023), the findings from the estimations in the long run show a negative impact of gross domestic product on inflation. While the money supply has a negative impact on inflation in both the long run and the short run, the asymmetric results indicate that positive changes in exchange rates lead to decreased inflation in both the long run and the short run, while negative changes in exchange rates result in increased inflation. Furthermore, both positive and negative changes in oil prices lead to increased inflation in the long and short run. From the study's results, the main triggering factors of inflation in Egypt are instability in the exchange rate, oil prices, and money supply. Therefore, following a contractionary monetary policy is essential to tighten the money supply and avoid instability in the exchange rate market. Moreover, to curb inflation, the Central Bank of Egypt must ensure a stable exchange rate by attracting foreign private investment through macroeconomic policies that incentivize foreign investors.

Keywords: Asymmetric Effects; Exchange Rate; Oil Prices; Inflation; NARDL Model (search for similar items in EconPapers)
Date: 2025
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DOI: 10.32479/ijeep.18484

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