Inflation and Inflation Uncertainty Revisited: Evidence from Egypt

Mesbah Fathy Sharaf

20 citations0/0 files storedEconomies

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Monetary Policy and Economic Impact Financial Risk and Volatility Modeling Market Dynamics and Volatility

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.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 20 citations exist upstream.

References

1991Conditional Heteroskedasticity in Asset Returns: A New Approach 1993On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks 2002Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis 1977Nobel Lecture: Inflation and Unemployment 1986A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information 1990Testing for a Unit Root in a Time Series With a Changing Mean 1998Testing for a unit root in variables with a double change in the mean 2000Inflation and Welfare

Cited by

2018Private Sector Credit and Inflation Volatility 2021The external debt‐inflation nexus in Egypt

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.