An Evaluation of the Egyptian Monetary Policy during the Period (1997/1998-2008/2009)

By Rady, Dina Abdel Moneim | Journal of International Business Research, July 2010 | Go to article overview
Save to active project

An Evaluation of the Egyptian Monetary Policy during the Period (1997/1998-2008/2009)


Rady, Dina Abdel Moneim, Journal of International Business Research


INTRODUCTION

The principal objective of monetary policy during the period in consideration is more or less unchanged, focusing on price stability and stabilization of the exchange rate.

Moreover, the monetary authorities had other goals which include fostering output, promoting exports, and raising foreign competitiveness.

During the period 1997/1998-2002/2003, the central bank of Egypt's principle target was to control the excess reserves; growth in total liquidity (M2) was the intermediate target. In the year 2003, the CBE changed focused on price stability as the main target of its monetary policy. Therefore we divide the period into two phases, the first one from 1997/1998 to 2002/2003 and the second phase from 2003/2004 to 2008/2009.

The following figures show the trends in some indicators that were the focus of the monetary policy in different intervals of time.

[FIGURE 1 OMITTED]

Figure (1) shows the real GDP growth rate trends that started with the slow down resulting from the Asian financial crisis then showed ups and downs in its value in short terms cycles.

[FIGURE 2 OMITTED]

Figure (2) shows the total liquidity (M2) annual percentage change during the mentioned period, which showed ups and downs trends except for the period (2000/2001-2003/2004) when (M2) showed a continuous increase.

[FIGURE 3 OMITTED]

Figure (3) shows the exchange rate (L.E/$) during the mentioned period, which showed a continued increase in its value during the years 1997/1998-2002/2003, then hardly showed a trend of decline through the following years till the end of the period.

[FIGURE 4 OMITTED]

Figure (4) shows the values of net international reserves ($bn) during the mentioned period, which started with a decline in the value till the year 2003/2004, then showed a continued increase till the end of the period.

[FIGURE 5 OMITTED]

Figure (5) shows the Average inflation rate during the period which was unstable and showed ups and downs in sharp trends.

[FIGURE 6 OMITTED]

Figure (6) shows the budget deficit as a percentage of the GDP during the mentioned period, which showed a sharp rise during the period 1999/2000-2002/2003, then gradually started to decline.

Analyzing the different figures that represented the main objectives of the monetary policy during the period in consideration, we conclude that the monetary policy had no clear influence on maintaining any of these objectives except for just short intervals of time.

In the following sections we will analyze each phase, steps and mechanisms taken to deal with the situation.

THE FIRST PHASE: RESPONSIVE POLICIES TO ECONOMIC SHOCKS (1997/1998-2002/2003)

In 1990's Egypt undergone massive reform of the banking sector within its adopted Economic reform program, the growth of the banking sector together with the liberalization process undertaken in the economy represented an extra burden on the Central Bank of Egypt as the main regulator of the banking industry.

During the period 1997/1998-2001/2002; in addition to the principle target of controlling the excess reserves, the short run burden of curbing inflation and macroeconomic adjustment fell on monetary policy.

This phase witnessed three major shocks: the Luxor terrorist attack in 1997, the Asian financial crisis of 1997/1998, and the September 11th attack (2001) which negatively affected the growth of credit to the private sector. Furthermore the capital outflows which followed the international financial markets crisis has contributed to the worsening of the overall balance of payments.

The monetary authorities responded to this situation by letting commercial banks absorb the increase in foreign exchange demand and increase domestic credit, this increased the pressure on the exchange rate and forced the central bank to tighten monetary conditions during the year 1999/2000.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

An Evaluation of the Egyptian Monetary Policy during the Period (1997/1998-2008/2009)
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?