The Impact of monetary policy on strengthening financial stability in Egypt during the period (1990-2020): Analytical - Econometric Study

Document Type : Original Article

Authors

1 Instructor at the Higher Institute of Computer and Information Systems Abu Qir - Alexandria

2 Higher Institute of Computer and Information Systems, Abu Qir - Alexandria

Abstract

The research aims to study the impact of monetary policy on strengthening financial stability in Egypt, using time series data for the period (1990-2020), using the (ARDL-Bounds Test) model as an entry for co-integration to verify the direction of the causal relationship in the long term between the study variable.
While Error (ECM) to test the mechanisms of the relationship in the short term, and the results of the study showed the existence of a long-term equilibrium relationship between some monetary policy variables and the financial stability index, and the error correction coefficient parameter was characterized by its statistical significance and its negative sign. The results of the study showed that there is an inverse relationship between monetary policy variables (interest rate - money supply - foreign exchange rate) and the financial stability index, due to the fact that the increase in the interest rate, the increase in the money supply and fluctuation in the foreign exchange rate led to an increase in inflation rates, which negatively affects On the index of financial stability in Egypt during the period from (1990-2020), the study also showed that there is a direct relationship between (economic growth - trade openness - financial openness - the percentage of loans directed to the private sector of GDP) and the financial stability index in Egypt during the period (1990-2020).

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