Inflation variations has become an issue that impedes efficient resource allocation and inclusive growth in Egypt. High inflationary pressures negatively affect standards of living, poverty alleviation and finally markets’ efficiency. For the past decade, Research on the causes of inflation in emerging markets has been closely linked to exchange rates pass-through (ERPT). This is due to its perceived impacts on import prices and terms of trade shocks, which lead to a pass-through effect to domestic inflation. This research aims to contribute to the literature by investigating ERPT in Egypt with a nonlinear Autoregressive distributed lag model (NARDL). Recent research on ERPT has shown that using NARDL has proven the existence of asymmetric effects of EPRT. The study uses quarterly time series data from 2006Q1-2020Q4 to examine the relationship between exchange rate movements and Inflation. For the purpose of the model, the methodology examines exchange rate and energy price movements’ asymmetric effects on producer price inflation using a NARDL model. The findings revealed the following: (1) a weakly significant and symmetric ERPT in Egypt. (2) Inflation in Egypt is highly dependent on past values of itself or what the research calls “Built-in inflation”. (3) a strong significant and asymmetric pass-through effect of energy prices. The implications of the findings put forth a need to move towards a fully-fledged inflation targeting regime with crucial complementary policies.


School of Business


Economics Department

Degree Name

MA in Economics

Graduation Date

Spring 6-21-2022

Submission Date


First Advisor

Sarfaraz Ali Shah Syed

Committee Member 1

Mohammed Bouaddi

Committee Member 2

Roberto Cardinale


58 p.

Document Type

Master's Thesis

Institutional Review Board (IRB) Approval

Approval has been obtained for this item