Determinants of real exchange rate evidence : from egypt

الملخص EN

In November 2016, the Central Bank of Egypt (CBE) had announced the adoption of a floating exchange rate regime.

Determining the equilibrium exchange rate is a chronic problem in the Egyptian economy, this means that the exchange rate is determined according to several variables.

So, this research comes to examine the determinants of the exchange rate dealing with money supply, trade openness, and foreign exchange reserves.

This research uses time-series data from 1990 to 2018 and depends on the method of co-integration (Autoregressive Distributed Lag Model, ARDL) through which the relationship is estimated in the long run, and depends on the Error Correction Mechanism (ECM) method to estimate the relationship in the short run, and the model is applied through the statistical program EViews.

Besides using the descriptive method to view and analyze the exchange rate problem, the variables, and interpretation of the results.

This study revealed that foreign exchange reserves and broad money have a significant and positive impact on the real exchange rate in the long-run, as well as trade openness and foreign exchange reserves have a significant impact and positively related to the real exchange rate in the short-run.

The study also found, If the real exchange rate is deformed, it will need about 21 months to return to equilibrium.