Coordination of Monetary and Fiscal Policies: The Case of Egypt release_nftpo74e6fgonbfzynh3spdrmy

by Sahar Mohamed, Abdel-Haleim

Released as a article-journal .

2016  

Abstract

Coordination is defined as the necessary arrangements that assure that the decisions taken by monetary and fiscal authorities are not contradictory. The need for effective coordination of policies becomes pressing with the increasing independence of both authorities to implement their objectives. The purpose of the paper is to investigate the extent of coordination between monetary and fiscal policies in Egypt over the period (1974-2015). Quantifying the extent of coordination depends on the appropriate policy mix that responds effectively to different shocks. The results confirm that coordination of policies was absent or weak during most of the period under study, while it has slightly improved since 2003. However, there is still a room to improve coordination between policies, particularly after the issuance of the CBE law No. 80 of 2003 which renders monetary policy to be effective to accomplish its primary objective. Hence, the need for proper coordination of policies materialized with the issuance of the CBE law which guarantees independence to the central bank in conducting monetary policy with the aim of maintaining price stability. The paper evaluates the current institutional arrangements that characterize the coordination between monetary and fiscal policies in Egypt. This is followed by critical recommendations of the required institutional arrangements towards enhancing better coordination of both policies.
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