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Monetary policy and macroeconomic responses: non-recursive SVAR study of Egypt

Monetary policy and macroeconomic responses: non-recursive SVAR study of Egypt This paper aims to examine the effects of monetary policy and foreign shocks on output, inflation and exchange rate in Egypt.Design/methodology/approachThis 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.FindingsFirst, 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/implicationsThe limitation of the study is examining one country only.Practical implicationsThe 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 implicationsIt 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/valueIt is important for the CBE because it examines the effect of monetary policy and foreign shocks on macroeconomic variables. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economic Policy Emerald Publishing

Monetary policy and macroeconomic responses: non-recursive SVAR study of Egypt

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References (53)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1757-6385
DOI
10.1108/jfep-07-2018-0103
Publisher site
See Article on Publisher Site

Abstract

This paper aims to examine the effects of monetary policy and foreign shocks on output, inflation and exchange rate in Egypt.Design/methodology/approachThis 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.FindingsFirst, 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/implicationsThe limitation of the study is examining one country only.Practical implicationsThe 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 implicationsIt 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/valueIt is important for the CBE because it examines the effect of monetary policy and foreign shocks on macroeconomic variables.

Journal

Journal of Financial Economic Policy – Emerald Publishing

Published: Aug 6, 2019

Keywords: Monetary policy; Macroeconomics and monetary economics; Macroeconomic policy; E50; C100

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