Band 19, Heft 2

For more than a decade, civil conflicts intensity has been high in the Middle East and North Africa, yet the monetary and financial impacts of such episodes have received relatively little attention. Using macroeconomic and conflict panel data for Arab League members, Iran and Turkey during the period 1970–2018, this paper constructs a country-specific real exchange rate misalignment index and adopts an instrumental variable approach to show that civil conflicts lead to real exchange rate overvaluations in the region: a 1 unit increase in civil conflict intensity leads to a 0.24 unit increase in the RER misalignment index. The results suggest that upward pressures on the real exchange rate, such as inflation resulting from physical capital and output loss, dominate. Economic policy during post-conflict transitions should mitigate this effect by incorporating a strategy to realign the currency.

This paper analyses the world oil price pass-through to Egypt’s domestic inflation rate. The paper adopts the augmented Phillips curve framework and further extends it to consider the growing body of empirical evidence, suggesting that oil prices may have asymmetric effects on inflation. Accordingly, the paper examines and compares the symmetric and the asymmetric oil price pass-through to domestic inflation in the short run and the long run. A linear ARDL-ECM and the bounds cointegration tests are applied as well as a nonlinear asymmetric NARDL model and Wald tests for short-run and long-run asymmetries. The sample consists of quarterly data covering the period from 2001 Q3 to 2019 Q2. The results show that, in the short run, the pass-through of world oil prices to the Egyptian domestic inflation rate is symmetric and of small magnitude. However, on the long-run, oil price pass-through to inflation appears to be nonlinear and asymmetric, specifically, declining oil prices lead to a fall in domestic inflation that is more significant than the rise in inflation caused by rising oil prices.