Fiscal Signals and Inflationary Response: A Long-Run Model of Crisis-Era Dynamics in Egypt | ||
| المجلة العلمية للبحوث التجارية (جامعة المنوفية) | ||
| Article 20, Volume 59, Issue 4, October 2025, Pages 9-42 PDF (1.23 M) | ||
| Document Type: المقالة الأصلية | ||
| DOI: 10.21608/sjsc.2025.402379.1600 | ||
| Author | ||
| امل جميل عبد الفتاح* | ||
| جامعة باديا | ||
| Abstract | ||
| This study investigates the dynamic and long-run relationship between key fiscal and monetary policy variables and inflation in Egypt during the period 1990–2024, with a specific emphasis on the role of economic crises. Using annual time series data and employing the Autoregressive Distributed Lag (ARDL) modeling approach, the analysis assesses the impact of government spending (GSP), broad money supply (M2), exchange rate (ER), and crisis episodes (CRISIS) on inflation (INF). The results of the F-Bounds test confirm the existence of a stable long-term cointegration relationship among the variables. Empirical estimates indicate that money supply (M2) exerts a strong and statistically significant inflationary effect, both in the short and long run, affirming classical monetary theory. The exchange rate shows mixed but largely significant effects, reflecting its critical role in driving inflation through both direct and lagged channels. Crisis periods are found to amplify inflationary pressures, particularly in the immediate term, while government spending demonstrates delayed and modest effects, depending on its composition and direction. The model passes all major diagnostic and stability tests, confirming its robustness and reliability. Based on these findings, the study offers a set of actionable recommendations, including: (1) enhancing coordination between monetary and fiscal policies, (2) adopting a proactive and data-driven monetary stance, (3) implementing calibrated exchange rate flexibility, and (4) reallocating public expenditure toward productive investments and structural supply-side improvements. These policy measures are vital for improving inflation targeting and safeguarding macroeconomic stability, especially during periods of heightened uncertainty and crisis. | ||
| Keywords | ||
| Inflation; Government spending Economic crises; Monetary policy | ||
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