Egypt's Inflation determinants An Empirical Study

Abstract

The study analyzes the impact of a number of macroeconomics factors, which represent both sides of supply and demand, on Egypt's inflation rate during a specific time frame (1990-2022). This study examined whether the exchange rate, lending interest rates, monetary supply, and investment effect Egypt's Inflation symmetrically or asymmetrically. Semi-annual data was analyzed using Nonlinear Autoregressive Distributed Lag (NARDL) econometric method. The study's findings, Egypt's local currency devaluation negatively affects long-term and short-term inflation. Results also show that negative shocks to lending interest rates are insignificant in long and short - run. Findings also show illiterate that positive shocks to lending rates have negative long-term impacts on inflation and positive short-term one. Money’s negative effect on inflation suggests that Egypt's long-term and short-term inflation is caused by other variables. The research also showed that positive shocks to gross fixed capital formation lower long-term inflation. Short run negative shocks were insignificant, Inflation decreases as Egypt's gross fixed capital formation rises. Long-term inflation rates would drop with increased government spending, the data showed. The results indicated that government spending increases would result in a long-term decline in inflation rates.

Keywords

• inflation
• monetary supply
• government spending