The Sources of Inflation in Egypt: A Multivariate Co-integration Analysis

El-Sakka, Mohammed; Ghali, Khalifa H

doi:10.2202/1475-3693.1046

Cited by 8 publications

(6 citation statements)

References 17 publications

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“…The low R 2 s in all the output gap models is indicative that much of the variations remain to be explained. This finding is consistent with the literature in that real factors such as output gaps have no explanatory power in determining inflation in emerging markets (Loungani and Swagel, 2001;El-Sakka and Ghali, 2005;Ramakrishnan and Vamvakidis, 2002 ).…”

Section: Out-of-sample Forecastssupporting

confidence: 92%

Output gap and inflation nexus: the case of United Arab Emirates

Osman

Louis

Balli

2009

IJEBR

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Output gap is generally used in assessing both the inflationary pressures and the cyclical position of a nation's economy. However, this variable is not observable and must be estimated. In this paper, we accomplish two tasks. First, we estimate the output gap for the United Arab Emirates (UAE) using four different statistical methods (i.e. the linear method, the Hodrick-Prescott filter, Band-pass filter and the unobserved components model). Second, we evaluate to what extent the fluctuations of output gap, however constructed or measured, are a good predictor of inflation in the UAE. This is carried out by comparing the out-of-sample forecasts generated by the output gap based models to those of the model with alternative indicator, and the benchmark models. Interestingly, although the different measures of output gap produce a broadly similar profile of the UAE business cycles, we could not find any statistical evidence that this variable is a useful predictor of inflation in the UAE.

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Section: Out-of-sample Forecastssupporting

confidence: 92%

Output gap and inflation nexus: the case of United Arab Emirates

Osman

Louis

Balli

2009

IJEBR

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“…Darrat (1997), Deme and Fayissa (1995) and Boujelbene and Boujelbene (2010) find that import prices are an important determinant for the level of inflation. Several studies Boschi and Girardi (2007), Darrat (1997), El-Sakka and Ghali (2005) and Boujelbene and Boujelbene (2010) have also taken into account of countries exchange rates when explaining the level of inflation. Furthermore, Kandil (2005) and Kose et al (2012) show that the cost of borrowing capital (interest rates) is an important determinant for inflation especially on the cost-push side.…”

Section: Empirical Modelmentioning

confidence: 99%

A Test of the Fiscal Theory of Price Level: Case Study of Nigeria

Tule¹,

Usman²,

Ogundele³

et al. 2019

IJEFI

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The paper tests the efficacy of fiscal theory of price level in Nigeria using an autoregressive distributed lag model for the period from 2002 Q1 to 2017 Q4. The study seeks to test the hypothesis that of Leeper (1991) and Sims (1998) that the price level is not independently determined by the monetary authorities, rather it is as a result of the relationship between monetary and fiscal authorities. The Nigerian Federal Government has had to resort to continuous borrowing in order to meet its financial obligations. The size of the fiscal deficit has ballooned which if not controlled could worsen fiscal vulnerability and eventually lead to financial distress. We find that fiscal deficits have a positive and statistically significant effect on inflation in all models estimated, attributed to the high degree of fiscal dominance in Nigeria. Giving our findings, Nigerian economy needs to address the challenge of high fiscal imbalances.

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“…One policy measure is establishing a nominal anchor for the monetary policy to stabilize inflation expectation and hence lower inflation rates. In addition, previous studies showed that structural reforms based on improving Egypt's productive capacity, reducing the budget deficit and national debts, are crucial for controlling inflation (El-Sakka and Ghali, 2005 [35]). Keskek and Orhan (2010) [16] found strong evidence, using data from Turkey, that inflation-oriented monetary policy effectively reduces the inflation persistence and eliminates uncertainty.…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 99%

Inflation and Inflation Uncertainty Revisited: Evidence from Egypt

Sharaf

2015

Economies

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Abstract:The welfare costs of inflation and inflation uncertainty are well documented in the literature and empirical evidence on the link between the two is sparse in the case of Egypt. This paper investigates the causal relationship between inflation and inflation uncertainty in Egypt using monthly time series data during the period January 1974-April 2015. To endogenously control for any potential structural breaks in the inflation time series, Zivot and Andrews (2002) and Clemente-Montanes-Reyes (1998) unit root tests are used. The inflation-inflation uncertainty relation is modeled by the standard two-step approach as well as simultaneously using various versions of the GARCH-M model to control for any potential feedback effects. The analyses explicitly control for the effect of the Economic Reform and Structural Adjustment Program (ERSAP) undertaken by the Egyptian government in the early 1990s, which affected inflation rate and its associated volatility. Results show a high degree of inflation-volatility persistence in the response to inflationary shocks. Granger-causality test along with symmetric and asymmetric GARCH-M models indicate a statistically significant bi-directional positive relationship between inflation and inflation uncertainty, supporting both the Friedman-Ball and the Cukierman-Meltzer hypotheses. The findings are robust to the various estimation methods and model specifications. The findings of this paper support the view of adopting inflation-targeting policy in Egypt, after fulfilling its preconditions, to reduce the welfare cost of inflation and its related uncertainties. Monetary authorities in Egypt should enhance the credibility of monetary policy and attempt to reduce inflation uncertainty, which will help lower inflation rates.

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The Sources of Inflation in Egypt: A Multivariate Co-integration Analysis

Cited by 8 publications

References 17 publications

Output gap and inflation nexus: the case of United Arab Emirates

Output gap and inflation nexus: the case of United Arab Emirates

A Test of the Fiscal Theory of Price Level: Case Study of Nigeria

Inflation and Inflation Uncertainty Revisited: Evidence from Egypt

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