{"id":14702,"date":"2017-12-07T15:21:00","date_gmt":"2017-12-07T15:21:00","guid":{"rendered":"https:\/\/eces.org.eg\/?p=14702"},"modified":"2024-05-29T11:45:24","modified_gmt":"2024-05-29T11:45:24","slug":"much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium","status":"publish","type":"post","link":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/","title":{"rendered":"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium"},"content":{"rendered":"\n<p>This paper estimates Egypt\u2019s equilibrium real exchange rate and exchange rate misalignment based on economic fundamentals over the period 2001Q3-2017Q3. Focusing on the more recent period, we find that the Egyptian pound was undervalued by about 22.3 percent in 2017Q1 due to overshooting its equilibrium value after floating the currency in 2016Q4. The currency undervaluation then declined to 18.5 percent in 2017Q3 driven by an increase in the real effective exchange rate due to a surge in domestic inflation. With regard to the determinants of the equilibrium real exchange rate, we find the productivity differential (vis-\u00e0-vis Egypt\u2019s trade partners) and trade openness to be the most significant factors. We also provide projections for the equilibrium real exchange rate and exchange rate misalignment until 2020Q4, which reveal that the exchange rate undervaluation will be dissipating fast due to high inflation. If the nominal exchange rate stabilizes at its level in 2017Q3 (17.73 pounds per US dollar), the currency will be overvalued by 13.1 percent in 2020Q4. Given the uncertainty surrounding the projections, a forecast combination approach is also presented. Finally, the paper highlights the implications of the empirical findings for the conduct of monetary policy in Egypt.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This paper estimates Egypt\u2019s equilibrium real exchange rate and exchange rate misalignment based on economic fundamentals over the period 2001Q3-2017Q3. Focusing on the more recent period, we find that the Egyptian pound was undervalued by about 22.3 percent in 2017Q1 due to overshooting its equilibrium value after floating the currency in 2016Q4. The currency undervaluation [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":14703,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[65],"tags":[415,416,417,418,419,413,414],"class_list":["post-14702","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-working-papers","tag-exchange-rate-undervaluation","tag-economic-fundamentals","tag-structural-break","tag-exchange-rate-misalignment","tag-equilibrium-real-exchange-rate","tag-nominal-exchange-rate","tag-inflation"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium - ECES<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium - ECES\" \/>\n<meta property=\"og:description\" content=\"This paper estimates Egypt\u2019s equilibrium real exchange rate and exchange rate misalignment based on economic fundamentals over the period 2001Q3-2017Q3. Focusing on the more recent period, we find that the Egyptian pound was undervalued by about 22.3 percent in 2017Q1 due to overshooting its equilibrium value after floating the currency in 2016Q4. The currency undervaluation [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/\" \/>\n<meta property=\"og:site_name\" content=\"ECES\" \/>\n<meta property=\"article:published_time\" content=\"2017-12-07T15:21:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-05-29T11:45:24+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/eces.org.eg\/wp-content\/uploads\/2023\/04\/W-P-En-190-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1791\" \/>\n\t<meta property=\"og:image:height\" content=\"2560\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"admin-eces-staging\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin-eces-staging\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/\"},\"author\":{\"name\":\"admin-eces-staging\",\"@id\":\"https:\/\/eces.org.eg\/#\/schema\/person\/7981d9621302fef3e6e0a1f65d658135\"},\"headline\":\"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium\",\"datePublished\":\"2017-12-07T15:21:00+00:00\",\"dateModified\":\"2024-05-29T11:45:24+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/\"},\"wordCount\":211,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/eces.org.eg\/#organization\"},\"keywords\":[\"exchange rate undervaluation\",\"economic fundamentals\",\"structural break\",\"exchange rate misalignment\",\"equilibrium real exchange rate\",\"nominal exchange rate\",\"inflation\"],\"articleSection\":[\"Working Papers\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/\",\"url\":\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/\",\"name\":\"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium - ECES\",\"isPartOf\":{\"@id\":\"https:\/\/eces.org.eg\/#website\"},\"datePublished\":\"2017-12-07T15:21:00+00:00\",\"dateModified\":\"2024-05-29T11:45:24+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/eces.org.eg\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/eces.org.eg\/#website\",\"url\":\"https:\/\/eces.org.eg\/\",\"name\":\"ECES\",\"description\":\"The Egyptian Center For Economic Studies\",\"publisher\":{\"@id\":\"https:\/\/eces.org.eg\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/eces.org.eg\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/eces.org.eg\/#organization\",\"name\":\"ECES\",\"url\":\"https:\/\/eces.org.eg\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/eces.org.eg\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/eces.org.eg\/wp-content\/uploads\/2022\/12\/eces-logo-blue-text-beside.png\",\"contentUrl\":\"https:\/\/eces.org.eg\/wp-content\/uploads\/2022\/12\/eces-logo-blue-text-beside.png\",\"width\":1794,\"height\":324,\"caption\":\"ECES\"},\"image\":{\"@id\":\"https:\/\/eces.org.eg\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/eces.org.eg\/#\/schema\/person\/7981d9621302fef3e6e0a1f65d658135\",\"name\":\"admin-eces-staging\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/eces.org.eg\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/53bfa8ab3f374bc6d5f1b8efd03ab8a47e7162e412c1b93b788f5fe73e2927fd?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/53bfa8ab3f374bc6d5f1b8efd03ab8a47e7162e412c1b93b788f5fe73e2927fd?s=96&d=mm&r=g\",\"caption\":\"admin-eces-staging\"},\"sameAs\":[\"https:\/\/eces.org.eg\"],\"url\":\"https:\/\/eces.org.eg\/en\/author\/admin-eces-staging\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium - ECES","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/","og_locale":"en_US","og_type":"article","og_title":"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium - ECES","og_description":"This paper estimates Egypt\u2019s equilibrium real exchange rate and exchange rate misalignment based on economic fundamentals over the period 2001Q3-2017Q3. Focusing on the more recent period, we find that the Egyptian pound was undervalued by about 22.3 percent in 2017Q1 due to overshooting its equilibrium value after floating the currency in 2016Q4. The currency undervaluation [&hellip;]","og_url":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/","og_site_name":"ECES","article_published_time":"2017-12-07T15:21:00+00:00","article_modified_time":"2024-05-29T11:45:24+00:00","og_image":[{"width":1791,"height":2560,"url":"https:\/\/eces.org.eg\/wp-content\/uploads\/2023\/04\/W-P-En-190-scaled.jpg","type":"image\/jpeg"}],"author":"admin-eces-staging","twitter_card":"summary_large_image","twitter_misc":{"Written by":"admin-eces-staging","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/#article","isPartOf":{"@id":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/"},"author":{"name":"admin-eces-staging","@id":"https:\/\/eces.org.eg\/#\/schema\/person\/7981d9621302fef3e6e0a1f65d658135"},"headline":"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium","datePublished":"2017-12-07T15:21:00+00:00","dateModified":"2024-05-29T11:45:24+00:00","mainEntityOfPage":{"@id":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/"},"wordCount":211,"commentCount":0,"publisher":{"@id":"https:\/\/eces.org.eg\/#organization"},"keywords":["exchange rate undervaluation","economic fundamentals","structural break","exchange rate misalignment","equilibrium real exchange rate","nominal exchange rate","inflation"],"articleSection":["Working Papers"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/","url":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/","name":"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium - ECES","isPartOf":{"@id":"https:\/\/eces.org.eg\/#website"},"datePublished":"2017-12-07T15:21:00+00:00","dateModified":"2024-05-29T11:45:24+00:00","breadcrumb":{"@id":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/eces.org.eg\/en\/much-ado-about-the-egyptian-pound-exchange-rate-misalignment-and-the-path-towards-equilibrium\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/eces.org.eg\/"},{"@type":"ListItem","position":2,"name":"Much ado about the Egyptian pound: Exchange Rate Misalignment and the path towards Equilibrium"}]},{"@type":"WebSite","@id":"https:\/\/eces.org.eg\/#website","url":"https:\/\/eces.org.eg\/","name":"ECES","description":"The Egyptian Center For Economic Studies","publisher":{"@id":"https:\/\/eces.org.eg\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/eces.org.eg\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/eces.org.eg\/#organization","name":"ECES","url":"https:\/\/eces.org.eg\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/eces.org.eg\/#\/schema\/logo\/image\/","url":"https:\/\/eces.org.eg\/wp-content\/uploads\/2022\/12\/eces-logo-blue-text-beside.png","contentUrl":"https:\/\/eces.org.eg\/wp-content\/uploads\/2022\/12\/eces-logo-blue-text-beside.png","width":1794,"height":324,"caption":"ECES"},"image":{"@id":"https:\/\/eces.org.eg\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/eces.org.eg\/#\/schema\/person\/7981d9621302fef3e6e0a1f65d658135","name":"admin-eces-staging","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/eces.org.eg\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/53bfa8ab3f374bc6d5f1b8efd03ab8a47e7162e412c1b93b788f5fe73e2927fd?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/53bfa8ab3f374bc6d5f1b8efd03ab8a47e7162e412c1b93b788f5fe73e2927fd?s=96&d=mm&r=g","caption":"admin-eces-staging"},"sameAs":["https:\/\/eces.org.eg"],"url":"https:\/\/eces.org.eg\/en\/author\/admin-eces-staging\/"}]}},"_links":{"self":[{"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/posts\/14702","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/comments?post=14702"}],"version-history":[{"count":3,"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/posts\/14702\/revisions"}],"predecessor-version":[{"id":22652,"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/posts\/14702\/revisions\/22652"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/media\/14703"}],"wp:attachment":[{"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/media?parent=14702"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/categories?post=14702"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eces.org.eg\/en\/wp-json\/wp\/v2\/tags?post=14702"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}