Exchange Rate Pass-Through in the Mideast Region: Evidence from Egypt and Israel

Ahmed Sabry Abou-Zaid

The IUP Journal of Monetary Economics, 2011, vol. IX, issue 1, 66-83

Abstract: In the early years of exchange rate liberalization, it is expected to find close association between exchange rate movements and domestic prices. That is, countries that move from fixed to floating exchange rate regime will probably experience an increase in their domestic prices following the liberalization. Because of ‘fear of inflation’, Egypt and Israel delayed the exchange rate liberalization process despite IMF’s call for it. This paper is an attempt to investigate the impact of exchange rate movements on different prices in Egypt and Israel using a VAR approach. It also tests the validity of the Taylor hypothesis that low inflationary environment leads to a low exchange rate pass-through.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjmo:v:09:y:2011:i:1:p:66-83

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