Article

 

Switching to the Inflation Targeting Regime: The Case of Egypt (p.106-131)

by

Ibrahim L. Awad, Charles University & Zagazig University

Keywords : Inflation targeting, Demand for money function, Monetary policy in Egypt

JEL classification : E410, E510, E520, E580, E590

Abstract

The purpose of this paper is to answer the question of whether Egypt should switch to the inflation targeting (IT) regime or not? Our judgment on adopting IT is based on the practical experience of the inflation targeters and on whether the monetary targeting regime (MTR) currently applied in Egypt is efficient or not. The study concluded that the MTR in Egypt is not efficient enough to tie down individuals’ expectations about the future path of inflation. Taking into account that the IT regime is a way of reforming monetary policy and it does not worsen economic performance in practice, it becomes necessary for Egypt to take practical steps toward adopting IT.