Is monetary policy in Egypt backward or forward-looking?

• Amr Sadek Hosny ^[1]
  1. [1] International Monetary Fund, Washington, USA
• Localización: Applied econometrics and international development, ISSN 1578-4487, Vol. 14, Nº. 2, 2014, págs. 151-162
• Idioma: inglés
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• Resumen

  • 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.