The Taylor Rule in Egypt: Is it Optimal? Is there Equilibrium Determinacy?

• 영문명: The Taylor Rule in Egypt: Is it Optimal? Is there Equilibrium Determinacy?
• 발행기관: 세종대학교 경제통합연구소
• 저자명: Mohamed Maher Yanzhi Zhao Chuanzhong Tang
• 간행물 정보: 『Journal of Economic Integration』제37권 제3호, 484~522쪽, 전체 39쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2022.09.30

영문 초록

We investigate Egypt's Taylor rule (interest rate targeting) between 1976 and 2019 by including the main economic variables in its reaction function. Using the Taylor principle, we investigate Egypt’s monetary policy optimality. To this end, we conduct the generalized method of moments (GMM) estimation procedure with different Taylor rule specifications to deal with potential endogeneity among variables. Our GMM estimates reveal that the partial adjustment coefficient is of considerable magnitude, indicating the explanatory power of policy inertia on many total variations in the current values of the nominal interest rate in Egypt. Furthermore, the inflation gap coefficient violates the Taylor principle, making the policy procyclical and inflation 'spiral' and inducing divergence from the long-run equilibrium. Therefore, Egypt's Taylor rule, and thus monetary policy, reflects the indeterminacy of equilibrium and is a passive and destabilizing policy. Besides, the output gap coefficient was unexpectedly found to be insignificant.

목차

Ⅰ. Introduction

Ⅱ. Background of the Egyptian Economy and Its Monetary Policy

Ⅲ. Literature Review

Ⅳ. Determinacy and the Taylor Principle

Ⅴ. Research Methodology

Ⅵ. Concluding Remarks

References

키워드

Monetary policy Taylor rule Taylor principle Determinacy Kapetanios test Structural breaks