Are international food price spikes the source of Egypt’s high inflation?

الملخص EN

This paper examines whether domestic inflation spikes in Egypt during 2001-2011 were primarily the result of external food price shocks.

To estimate the pass-through of international food price inflation to domestic price inflation, two different methodologies are used : a 2-step regression model estimates the pass-through in the long run, and a VAR mode provides the short-run estimates.

The empirical evidence confirms that pass-through is high in the short term, but not in the long run.

More precisely, our results show that (i) Long-run pass-through to domestic food inflation is relatively low, lying between 13% and 16 %, while the long-term spill-over from domestic food inflation to core inflation is moderate, lying around 60 % ; (ii) In the short-term, pass-through is relatively high, estimated around 29 % after 6 months and around two-thirds after a year, but the spill-over effect to core inflation is limited ; (iii) international food price shocks explain only a small portion of domestic inflation shocks in both the short and long terms; and (iv) international price inflation has asymmetric effects on domestic prices.