Topics in Middle Eastern and North African Economies

Document Type

Article

Publication Date

9-1-2023

Abstract

While the exchange rate pass-through to Inflation has been thoroughly investigated in the theoretical and empirical literature, few studies have attempted to investigate the passthrough in Egypt with mixed results. This paper attempts at investigating the exchange rate passthrough to headline consumer prices in Egypt, including potential presence of asymmetric effects of a currency appreciation/depreciation on consumer prices. Nonlinear Autoregressive Distributed Lags methodology is used on quarterly data from 2001 to 2022. The paper's contribution to the literature is threefold: First, this paper utilizes an updated time series from 2001 to 2022. Second, a newly developed quantitative index that captures the magnitude and timing of changes in subsidized fuel prices domestically, to account for the high share of subsidized items in the consumer basket, is included in the list of control variables. In addition, the study also includes a control variable that tests the effect of low/high volatility in inflation, as a proxy for the effect of the monetary policy on the exchange rate pass-through to consumer prices. Finally, this paper utilizes stationarity and causality tests that account for structural breaks into the series, which have not been previously tested for Egypt, despite the country witnessing several break points in that period that could affect stationarity and the final conclusions as a result.

Journal Title

Topics in Middle Eastern and North African Economies

ISSN

2334-282X

Publisher

Middle East Economic Association and Loyola University Chicago

Volume

25

Issue

2

Comments

Presentation of the articles in the Topics in Middle Eastern and North African Economies was made possible by a limited license granted to Loyola University Chicago and Middle East Economics Association from the authors who have retained all copyrights in the articles.

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

Included in

Economics Commons

Share

COinS