Abstract

Dina Mohamed A. Bakr
Dynamic Stochasic General Equlibrium Models and Their Use in the Conduct of Monetary Policy Under Inflation Targeting in Egypt
This study aims to address important issues related to inflation targeting in Egypt: First: Investigation of both internal and external shocks that the Egyptian economy faced during the period from 2003-2015. In order to explain internal and external shocks to the Egyptian economy, the researcher employs auto-regressive moving average model (ARMA) & vector auto-regression (VAR) as well as dynamic stochastic general equilibrium (DSGE) modelling depending on quarterly data and then compares the outcomes of both approaches. Second: The choice between targeting all movements and fluctuations in the rate of inflation exclude changes (temporary fluctuations) (such as the supply-side shocks, rising energy prices and international prices of some food commodities) during the period from 2005-2015.Third: Design a model for monetary authorities in Egypt to target inflation -taking into account the government's intervention in setting prices - according to the Taylor rule- during the period from 2005-2015. In general, the researcher applied the deduction method through the use of dynamic stochastic general equilibrium modelling based on the maximum likelihood method to explain the previous latter issues. Key Words: Dynamic Stochastic General Equilibrium Models (DSGE)- Optimal Monetary Policy-Autoregressive Moving Average Models (ARMA) - Internal Shocks-External Shocks