Exchange Rate Passthrough to Import Prices and Domestic Inflation in Egypt

This paper studies exchange rate passthrough to import prices and domestic inflation in Egypt. Exchange rate passthrough to import prices is examined using yearly data from 1980 to 2016. Whereas exchange rate passthrough to domestic inflation is investigated using monthly data from 2011 to 2017. By regressing the import value index on exchange rate and lagged values of import value index, the paper predicts that passthrough in almost complete to imports, and import values tend to decrease on the long-run following a depreciation in the Egyptian Pound. For domestic inflation, after regressing CPI on nominal exchange rate and lagged values of CPI, the findings of the model show that inflation and exchange rate are positively correlated; a depreciation in the Egyptian pound translates into an increase in the overall inflation levels