Monetary policy and macroeconomic responses

non-recursive SVAR study of Egypt

Research output: Contribution to journalArticle

Abstract

Purpose: This paper aims to examine the effects of monetary policy and foreign shocks on output, inflation and exchange rate in Egypt. Design/methodology/approach: This paper studies the effects of monetary policy and foreign shocks on output, inflation and exchange rate by using non-recursive SVAR model and quarterly data. Findings: First, the empirical results reveal that monetary policy shocks, through changes in interest rate or money supply, have a significant effect on output, inflation and exchange rate in Egypt. Second, the world oil prices and foreign output have significant impacts on output, inflation and exchange rate in Egypt, while foreign interest rate has a significant effect on domestic output and inflation. Research limitations/implications: The limitation of the study is examining one country only. Practical implications: The Central Bank of Egypt (CBE) should adjust interest rate to stabilize inflation, output and exchange rate. By stabilizing inflation, output and exchange rate, the CBE would be able to achieve the ultimate targets of monetary policy, namely, price stability and economic growth. Social implications: It is important for the CBE because it shows the significant effect of monetary policy on macroeconomic variables in Egypt. Also, it is important for people because it shows the important role for the CBE. Originality/value: It is important for the CBE because it examines the effect of monetary policy and foreign shocks on macroeconomic variables.

Original languageEnglish
JournalJournal of Financial Economic Policy
DOIs
Publication statusAccepted/In press - 1 Jan 2019

Fingerprint

Egypt
Macroeconomics
Monetary policy
Exchange rates
Central bank
Inflation rate
Interest rates
Inflation
Macroeconomic variables
Money supply
SVAR model
Price stability
Economic growth
Monetary policy shocks
Empirical results
Oil prices
Design methodology

Keywords

  • Macroeconomic policy
  • Macroeconomics and monetary economics
  • Monetary policy

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

@article{8bec80fda1c248ea8551195549f261d4,
title = "Monetary policy and macroeconomic responses: non-recursive SVAR study of Egypt",
abstract = "Purpose: This paper aims to examine the effects of monetary policy and foreign shocks on output, inflation and exchange rate in Egypt. Design/methodology/approach: This paper studies the effects of monetary policy and foreign shocks on output, inflation and exchange rate by using non-recursive SVAR model and quarterly data. Findings: First, the empirical results reveal that monetary policy shocks, through changes in interest rate or money supply, have a significant effect on output, inflation and exchange rate in Egypt. Second, the world oil prices and foreign output have significant impacts on output, inflation and exchange rate in Egypt, while foreign interest rate has a significant effect on domestic output and inflation. Research limitations/implications: The limitation of the study is examining one country only. Practical implications: The Central Bank of Egypt (CBE) should adjust interest rate to stabilize inflation, output and exchange rate. By stabilizing inflation, output and exchange rate, the CBE would be able to achieve the ultimate targets of monetary policy, namely, price stability and economic growth. Social implications: It is important for the CBE because it shows the significant effect of monetary policy on macroeconomic variables in Egypt. Also, it is important for people because it shows the important role for the CBE. Originality/value: It is important for the CBE because it examines the effect of monetary policy and foreign shocks on macroeconomic variables.",
keywords = "Macroeconomic policy, Macroeconomics and monetary economics, Monetary policy",
author = "Shokr, {Mohamed Aseel} and {Abdul Karim}, Zulkefly and Zaidi, {Mohd Azlan Shah}",
year = "2019",
month = "1",
day = "1",
doi = "10.1108/JFEP-07-2018-0103",
language = "English",
journal = "Journal of Financial Economic Policy",
issn = "1757-6385",
publisher = "Emerald Group Publishing Ltd.",

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AU - Shokr, Mohamed Aseel

AU - Abdul Karim, Zulkefly

AU - Zaidi, Mohd Azlan Shah

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AB - Purpose: This paper aims to examine the effects of monetary policy and foreign shocks on output, inflation and exchange rate in Egypt. Design/methodology/approach: This paper studies the effects of monetary policy and foreign shocks on output, inflation and exchange rate by using non-recursive SVAR model and quarterly data. Findings: First, the empirical results reveal that monetary policy shocks, through changes in interest rate or money supply, have a significant effect on output, inflation and exchange rate in Egypt. Second, the world oil prices and foreign output have significant impacts on output, inflation and exchange rate in Egypt, while foreign interest rate has a significant effect on domestic output and inflation. Research limitations/implications: The limitation of the study is examining one country only. Practical implications: The Central Bank of Egypt (CBE) should adjust interest rate to stabilize inflation, output and exchange rate. By stabilizing inflation, output and exchange rate, the CBE would be able to achieve the ultimate targets of monetary policy, namely, price stability and economic growth. Social implications: It is important for the CBE because it shows the significant effect of monetary policy on macroeconomic variables in Egypt. Also, it is important for people because it shows the important role for the CBE. Originality/value: It is important for the CBE because it examines the effect of monetary policy and foreign shocks on macroeconomic variables.

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KW - Macroeconomics and monetary economics

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