IS EGYPT READY TO APPLY INFLATION TARGETING REGIME?
|Author(s):|| Ibrahim Awad , |
|Type:||Articles in refereed journals|
|ISSN / ISBN:||1843-763X|
|Published in:||Review of Economic & Business Studies|
|Publishing place:||Doctoral School of Economics of the Alexandru Ioan Cuza University|
|Keywords:||Inflation Targeting Regime; Prerequisites for Inflation Targeting regime; Inflation targeting in Egypt|
|JEL codes:||E500, E580, E600|
|Abstract:||The purpose of this study is to answer the question ‘Is Egypt ready to
apply IT regime? The researcher presumed that; a country is ready to apply IT
regime once the prerequisites for IT regime are available. Comparing the
current position of Egypt with some emerging market economies, the
conclusions point to the following: (i) the CBE is not factually independent.
Although the CBE has been granted legal independent instrument, the
existence of the government representatives as voting members in the MPC
and the coercion of the CBE to extend finance to the government are two
elements sufficient to underpin the de facto independence of the CBE; (ii)
inflation targets are expected to be missed under the possibility that the
behavior of the CBE will be similar to the behavior of the majority of emerging
market economies, i.e. adopting IT regime whereas implicitly targeting FX
rate; and (iii) the current level of knowledge about some central issues of
designing IT regime and the quality of the available data are not satisfactory
to support the adoption of IT regime. The study concluded that Egypt is still
not ready to apply IT regime.