English Title
Monetary Condition Index and its Relation with other Macroeconomic Variables
Keywords
Monetary policy - economic growth - monetary condition index- real interest rate- GDP
Disciplines
Architecture | Business | Business Administration, Management, and Operations | Engineering | Life Sciences
Abstract
This article aims to construct a monetary condition index (MCI) for five countries in the MENA region, namely Algeria, Bahrain, Egypt, Jordan, and Morocco, in order to interpret the stance of monetary policy in these countries. A broad MCI has been constructed by combining two transmission channels of monetary policy, the real interest rate and the real effective exchange rate, along with bank credit to the private sector. These three indicators of the monetary conditions are collected for these countries over the period 1995–2020 for all countries except for Bahrain, which has data from 1995 to 2015. Principal component analysis (PCA) is used to construct the monetary condition index (MCI). Then a vector auto-regression method is employed to explore the impulse response of MCI to consumer price index (CPI) and GDP. The results reveal that the MCI of Bahrain, Egypt, and Jordan can predict inflation and economic growth in the long run but cannot do that in the short run. However, in the cases of Algeria and Morocco, the findings show that MCI cannot predict inflation and GDP in the short and long run.
Author ORCID Identifier
Jinan Kassem - https://orcid.org/0000-0001-7470-8499.
Recommended Citation
Kassem, Jinan Jihad
(2024)
"MONETARY CONDITION INDEX AND ITS RELATION WITH OTHER MACROECONOMIC VARIABLES: AN EMPIRICAL STUDY IN SELECTED MENA COUNTRIES,"
BAU Journal - Creative Sustainable Development: Vol. 5:
Iss.
1, Article 4.
DOI: https://doi.org/10.54729/2789-8334.1112
ISSN
2789-8334
Included in
Architecture Commons, Business Administration, Management, and Operations Commons, Engineering Commons, Life Sciences Commons