The Effect of Some Recent Changes in Egyptian Monetary Policy: Measurement and Evaluation
The Effect of Some Recent Changes in Egyptian Monetary Policy: Measurement and Evaluation
This chapter examines the effect of recent changes in the structure of the monetary policy in Egypt on the monetary system and on the performance of the economy. It is organized as follows. Section 1 presents a brief historical overview that delineates the main objectives, targets, and instruments of the policy of the Central Bank of Egypt (CBE) since the beginning of the 1990s. Section 2 evaluates the existing measures and direction of monetary policy from the mid-1980s to 2005 using a structural vector autoregression (VAR) that is chosen from a model that nests different possible descriptions of the CBE operating procedures. The selected VAR model is employed for measuring the changes in the stance during the period under investigation. Section 3 considers that model as a point of departure to describe the effect of monetary policy shocks on real output subject to different stylized structural restrictions. Section 4 attempts to identify an underlying monetary policy rule for the CBE and to predict how real output, the interest rate, and inflation respond to stochastic disturbances in that rule using a structural VAR model, while Section 5 concludes.
Keywords: Egyptian economy, Central Bank of Egypt, monetary policy, monetary system, vector autoregression model
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