The Impact of Unconventional Monetary Policy on Economic Growth: Empirical Evidence from Emerging Markets with Special Reference to Egypt

نوع المستند : المقالة الأصلية

المؤلفون

1 Associate Professor of Economics Faculty of Economics and Political Sciences

2 Master’s Candidate Economics Department Faculty of Economics and Political Sciences

10.21608/acj.2025.451404

المستخلص

Since the COVID-19 pandemic, central banks (CBs) globally have introduced substantial stimulus programs, relying heavily on unconventional monetary policy (UMP) tools, similar to the post-2007–2008 global financial crisis (GFC) period. Emerging markets and developing economies (EMDEs) have also adopted Asset Purchase Programs (APPs) for the first time to address disruptions and boost confidence. This paper investigates whether CBs in 25 EMDEs, including Egypt, influenced prices, financial market risk aversion and output through UMP tools. Using CB balance sheets as a proxy for UMP, a Panel VAR model was applied. Results show that, in the short run, UMP did not affect prices but positively impacted Gross Domestic Product (GDP). The response of the consumer price index (CPI) and Volatility index (VIX) varied, with significant effects on GDP observed over time. On the other hand, in the long-run, the CPI began to show a significant increase, indicating that CB asset expansion exerted upward pressure on prices over time. Besides, the response of the VIX began to taper off, stabilizing for the remainder of the forecast horizon, suggesting that the initial shock to central bank assets had a lasting, though diminishing, impact on market volatility. Regarding GDP, the response fluctuated, and the effect did not completely dissipate by the tenth period, indicating that the impact on GDP was more persistent than on inflation and financial market volatility.

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