埃及中央銀行通過矛盾政策維持經濟穩定

 

2008年期間，埃及的經濟非常不穩定被稱為The Triple Fs Crisis，這次危機重創了埃及經濟尤其是在燃料、食物和金融方面。因此，CBE（埃及中央銀行）采取了至關重要的貨幣政策，該政策是由Farouk el Oqda博士領導的。 The Triple Fs Crisis受到 WFP（世界糧食計劃署）的干預， 2008年食物開始瘋狂漲價，幾乎所有地區的小麥都由LE 350 漲到 LE 800。同時，大米也由原先的LE 400 漲到 LE 1200。同時，貧困人口占總人口的40%，就業和工資的不良情況拉低了埃及的整個生活水準。此外，燃油價格的大幅增長導致運輸成本提高，又加速了食品價格高漲，特別是在埃及，該國每年進口的700萬噸小麥占了糧食需求的40%。因此，這限制了人們的營養來源。此外，在全球經濟中發生的大規模金融危機確實對國內經濟影響很大，因為埃及的貿易市場與全球市場有很大關系。考慮到以上原因，CBE推出了一系列旨在保護國內經濟免受金融危機影響的貨幣政策。

 

Policies of the central bank of egypt埃及中央銀行通過矛盾政策維持經濟穩定

 

During the year 2008, the Egyptian economy witnessed major instability called The Triple Fs Crisis (Bordignon) as the economy was hardly hit in terms of Fuel, Food and Finance. Hence, the CBE (Central Bank of Egypt) adopted vital monetary policies that were smartly led by Dr. Farouk el Oqda, governor of the CBE. The Triple Fs Crisis was referred to by the WFP (World Food Programme) stating that food prices witnessed a dramatic increase in 2008 that reached 100% where the price of wheat increased from LE 350 to LE 800 as well as the rice which increased from LE 400 to LE 1200. Yet, the population, in which 40% represents poverty, did not experience an improvement in terms of jobs and income salaries resulting in lowering the Egyptian standards of living (Bordignon). In addition, a huge increase in fuel prices occurred resulting in a major escalation in transportation costs and therefore adding an additional upsurge to the food prices, especially that in the case of Egypt, the country imports 7 million tons of wheat annually in addition to 40% of its food needs (Bordignon) . Consequently, this limited the accessibility of the population to sources of nutrition. Besides, the massive financial crisis that took place in the global economy indeed had its effect on the domestic economy as the Egyptian market is greatly related to the global markets in terms of trade. As a result to all of the above factors, the CBE launched a series of monetary policies that aimed to protect the economy against the 3 sorts of crises.

 

The Effect of Food Crisis on Monetary Policies:貨幣政策對糧食危機的影響

 

One of the main steps taken by the central bank was to start adopting the Core Inflation method as a measure of inflation instead of solely focusing on the Headline CPI. Basically, Headline CPI is a way of determining the fluctuating weighted prices of the "consumption basket purchased by households" where the weights determine the level of consumption of the goods and services periodically. As a matter of fact, Core CPI is not a measure that replaces Headline CPI measure, but is a variant of the latter measure that depends on excluding highly volatile price shocks that occur to some goods and services; causing policymakers to face difficulties in determining and sorting out short run variability from more persistent price signals. Therefore, the CBE was able to represent another dynamic of inflation rate that can easily be understood by the public through excluding fruits and vegetables due to their dependency on climate and harvest circumstances, representing about 8.8% of the CPI basket, as well as regulated items, carrying 19.4% of the basket (CBE Monthly Inflation Note).

Due to the impact of the Triple F Crisis, particularly food prices and the accompanying effect of fuel prices on it, starting from February 2009 a major drop occurred in terms of Core inflation figures in comparison to the changes that the headline CPI witnessed. The drop in Core CPI recorded an annual decrease by 7.2% in comparison to the 0.3% decline in the Headline CPI. Hence, "the tame pace of increase in core prices compared to the sharp pace of increase in the prices of volatile food items, namely fruits & vegetables" was clearly shown in the magnitude difference between both measures of inflation during the year 2009 (CBE Monthly Inflation Note).

To be more specific in analyzing the increase of headline inflation, during the 3rd quarter of 2009, the CBE stated that 68% of the increase was due to the 30.9% escalation in the prices of fruits and vegetables. In addition, it is worth mentioning that during the first nine months of 2009, headline inflation reported 4.9% in comparison to 15.6% reported during the first nine months of 2008. In general, about 57% of the headline CPI increase during 2009 was due to severe inflation in food items (CBE Monthly Inflation Note).

 

貨幣政策對金融危機的影響-The Effect of the Financial Crisis on Monetary Policies:

 

A major smart step that the CBE took in order to shield the economy against the effects of the financial crisis was adopting a contractual monetary policy. While most of the countries worldwide were applying expansionary policies aiming to combat recession, the Central Bank of Egypt implemented a contractual monetary policy that planned to decrease money supply, increase discount rates and therefore decreasing inflation. Despite the opposition that the CBE faced by economists in applying this policy during a financial crisis, the CBE was actually keen on decreasing the skyrocketing food prices that could have cause undesirable consequences.#p#分頁標題#e#

It is important to mention that the CBE planned on implementing a short-term contractual policy that can be later reversed into an expansionary one, aiming only to tame food prices but at the same time defending the economy against a global recession.

 

Inflation:

Headline CPI Inflation:

In terms of Headline CPI inflation rates, it is obvious that the contractual policy had its effect on inflation, where starting September 2008; CPI inflation reported 0.3% instead of 2.2% in the previous month. Hence, the monetary policy that started from September 2008 until the beginnings of 2009 resulted in decreasing the level of inflation throughout this period to report its lowest point, -1.30%, on December 2009. Yet, after the expansionary policy was implemented CPI inflation rate started to fluctuate again with a positive correlation with the changes in Core inflation.

 

Core Inflation:

As well, the effect of the contractual policy is obvious on the Core Inflation where it decreased, reaching its minimum on December 2008 also to report -0.76%. And as shown in both graphs, the fluctuations in the CPI inflation curve is directly related to the changes in the Core Inflation due to the high volatility in food prices that the CBE was able to tame during the beginnings of the financial crisis.

However, it can be told from the graphs that the changes in Core inflation are less in volatility than the headline CPI resulting from the effect of food prices. It is also remarkable that the headline CPI was heading towards negative values on November 2009 reflecting the efforts that the CBE exerts in decreasing prices of the consumption basket.

 

Discount Rates:

The first step in the application of the contractual policy is increasing discount rates. The reason behind this increase is that discount rates are considered to be the Policy Rate that the CBE changes in order to affect all other interest rates in the country. Hence, when discount rates increase all interest rates attachable to the different sorts of loanable funds will increase as well. As seen in the graph, prior to September 2008 the discount rates were decreasing from 9% on July reaching 8.5% on August. Yet, the sharp increase that occurred on September is obvious due to the occurrence of the financial crisis reaching 11.5%. As a result, this increase motivated the public to save their money in terms of bank deposits or bonds resulting in a decrease in the level of consumption as well as the amount of money circulated within the economy. Then, in order to reverse the contractual policy, discount rates started to decrease starting from February until December to range between 10.5% and 8.5%, therefore shifting the money supply trend retroactively as it will be seen in the following graphs.

 

Monetary Aggregates:

Money (M1):

As shown in the graph, a major decrease occurred in both currency notes and demand deposits, or what is called by Money (M1), during the period December 2008 until February 2009. This decrease can be related to the increase in discount rates that started from September 2008 until January 2009 resulting then to the consequent increase in (M1) on March. Hence, subsequent to this change, inflation rates started to sharply drop, especially during December 2008 as seen above in the graphs. Yet, as mentioned before, starting February 2009 M1 was uprising again due to the decrease in discount rates.

 

Quasi Money:

However, in terms of Quasi money, it is obvious that it was not greatly affected by the contractual policy. This can be explained by the fact that the CBE planned for the application of a short run contractual policy. Meaning that it aimed to change the supply of narrow money items solely in order not to apply a sever change in the total money supply causing unemployment for instance. The trend in the total money supply is shown in the following graph as an increase by a decreasing rate, revealing the CBE's focus on M1 solely for a short term plan.

 

Nominal Market GDP:

Moreover, starting from September 2009 GDP grew largely as a result of the expansionary monetary policy adopted to combat the effects of the global recession. The GDP growth can be explained by the drop in discount rates during this period reaching 8.5%, the major increase in money supply, within both M1 and quasi money resulting all in higher level in consumption and hence in stability.

 

Work Cited:

 

"Monthly Statistical Bulliten." CBE. January 2010. CBE, Web. 25 Feb 2010. 

"Monthly Statistical Bulliten." CBE. September 2009. CBE, Web. 25 Feb 2010. 

"Monthly Statistical Bulliten." CBE. August 2009. CBE, Web. 26 Feb 2010. 

"Monthly Statistical Bulliten." CBE. January 2009. CBE, Web. 27 Feb 2010. 

"Monthly Statistical Bulliten." CBE. November 2008. CBE, Web. 26 Feb 2010. 

"Monetary Policy-Core Inflation." CBE. December 2009. CBE, Web. 25 Feb 2010. 

Bordigon, Mr. Gianpietro. World Food Programme. AUC, Cairo. 18/2/2010. Lecture.