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Inflation Dynamics in Egypt: Does Egypt's Trade Deficit Play a Role?
... In the Zimbabwean economy, inflationary periods are highly characterised by nominal monetary growth (money supply), foreign prices; exchange and interest rates, unit labour costs and real income (Chibber et al, 1991). Inflation in Egypt is primarily affected by the rate of growth of money supply, interest rate, depreciation of the exchange rate and trade deficit (Helmy, 2010). ...
... Egypt, like most countries in the world, faces the problem of inflation. A research carried out by E. Helmy (2010) analyzed the dynamics of inflation in Egypt by investigating the importance of the different sources of inflation over the past thirty years and to detect the impact of Egypt's chronic trade deficit on inflation in Egypt. In his model, he used the Granger causality tests, a variance autoregressive (VAR) model, impulse response functions (IRF) and variance error decomposition (VDC) analyses to test for the sources and dynamics of inflation in Egypt. ...
... He then recommended that if Egypt wants to boost its industrial export capacity and diminish its trade deficit gap, depreciation of the exchange rate, and then indirectly stabilising it at less than the market equilibrium exchange rate as in the case with China, should be considered. Accordingly, he added that important policy implication may be that depreciation of the pound and then stabilising it at a constant below market equilibrium exchange rate through indirect measures although might boost inflation and aggravate the trade deficit in the short run, yet it decreases them in the long run (Helmy, 2010). ...
This paper examined the macroeconomic determinants of inflation in Ghana using a cointegration approach. The main purpose of the paper is to investigate whether population growth, foreign direct investment, foreign aid, agricultural and service's output have a significance influence on the inflationary situations experienced in Ghana over the study period. The method of analysis was the cointegration analysis. The stationarity properties of all the variables of interest were checked and established. All the variables under consideration were found to be integrated of order one, that is, I (1). Johansen cointegration approach showed that there is both long and short run relationship among the variables; therefore, the vector error correction model was estimated. The study identified population growth, foreign direct investment, foreign aid, and service's output as major long run determinants of inflation in Ghana.
... In the case of Egypt, a few studies are found that focus on the role of fiscal policies as determinants of inflation, however, with no consideration of external or institutional factors (see Helmy, 2009;Fanizza and Soderling, 2006;. Other studies consider only the role of the monetary policy in the explanation of inflation (Sharaf, 2015;El Baz, 2014;Arbatli and Moriyama, 2011;Achour and Trabelsi, 2011;Helmy, 2010;and Youssef, 2007). There are also a few studies for Egypt that consider external factors as determinants of inflation, but they lack the inclusion of fiscal or monetary policies (see Hosny, 2013;Al-Shawarby and Selim, 2012;Noureldin, 2009; as well as El-Sakka and Ghali, 2005). ...
This paper empirically examines the influencing role of internal and external factors on the inflation rate for two emerging economies, Egypt and Mexico. The price level over the long run is affected by both internal and external factors in both countries. It was also found that both fiscal and monetary policies can be used to fight inflation over the long run. Furthermore, both the US interest rate and price affect the price level with the same sign in both countries over the long run. However, over the short run while as we expect the US price affects the price in Mexico it does not have any effect on Egypt's price.
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