The Monetary Targeting Regime in Egypt: Theoretical and Empirical Investigations
The Monetary Targeting Regime in Egypt: Theoretical and Empirical Investigations

Summary/Abstract: The objective of this paper is to answer the following question: can the central bank of Egypt achieve the goal of price stability under the currently applied monetary targeting regime? The answer depends on whether or not the demand for money function is stable in Egypt. Using quarterly data on the period 1995-2007, the study estimated the long run demand for money function in Egypt. By testing its stability for structural change, the demand for money function is found instable. Thus, the study concludes that the central bank of Egypt cannot achieve price stability under the currently applied monetary targeting regime.

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