Is Monetary Policy in Egypt Backward or Forward-Looking?

Amr Hosny

Applied Econometrics and International Development, 2014, vol. 14, issue 2

Abstract: The objective of this paper is to test whether monetary policy in Egypt has been backward or forward-looking over the 2002M1-2012M12 period. Using different specifications of a simple Taylor rule, we show that the Central Bank of Egypt (CBE) has become more forward-looking, especially after it formally announced the overnight interbank rate as its main monetary policy instrument in 2005M7. Our empirical results also indicate a significant interest rate smoothing effect and suggest that the exchange rate and the Egyptian revolution of 2011M1 have applied upward pressure on short-term interest rates in Egypt. Our findings also suggest that the CBE is successfully managing the transition towards an effective inflation targeting regime.

Keywords: Taylor rules; Egypt; inflation targeting. (search for similar items in EconPapers)
JEL-codes: E5 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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