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Are international food price spikes the source of Egypt's high inflation ?, Volume 1
 
Author:Al-Shawarby, Sherine; Selim, Hoda; Country:Egypt, Arab Republic of;
Date Stored:2012/08/20Document Date:2012/08/01
Document Type:Policy Research Working PaperSubTopics:Markets and Market Access; Currencies and Exchange Rates; Emerging Markets; Food & Beverage Industry; Access to Markets
Language:EnglishRegion:Middle East and North Africa
Report Number:WPS6177Collection Title:Policy Research working paper ; no. WPS 6177
Volume No:1  

Summary: This paper examines whether domestic inflation spikes in Egypt during 2001-2011 were primarily the result of external food price shocks. To estimate the pass-through of international food price inflation to domestic price inflation, two different methodologies are used: a two-step regression model estimates the pass-through in the long run, and a vector autoregression model provides the short-run estimates. The empirical evidence confirms that pass-through is high in the short term, but not in the long run. More precisely, the results show that (i) long-run pass-through to domestic food inflation is relatively low, lying between 13 and 16 percent, while the long-term spill-over from domestic food inflation to core inflation is moderate, lying around 60 percent; (ii) in the short term, pass-through is relatively high, estimated around 29 percent after 6 months and around two-thirds after a year, but the spill-over effect to core inflation is limited; (iii) international food price shocks explain only a small portion of domestic inflation shocks in both the short and long terms; and (iv) international price inflation has asymmetric effects on domestic prices.

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