The asymmetric impact of global economic policy uncertainty on inflation in Egypt

This paper investigates the impact of global economic policy uncertainty (EPU) on inflation in Egypt and explores whether this impact is symmetric or asymmetric. Using two decades of quarterly data on various determinants of inflation and a measure of global EPU, the paper employs linear and nonlinear autoregressive distributed lag (ARDL) regression models to analyse this relationship. Robustness checks, including recursive estimation of coefficients, and conducting forecasting analysis, are performed to support the findings. The results indicate that global EPU asymmetrically influences inflation in Egypt where increases in global EPU lead to a decrease in inflation by 20% and decreases in global EPU lead to an increase in inflation by 21%. This study contributes to the existing literature by examining the role of global EPU in driving domestic inflation in Egypt. Understanding global EPU's impact on inflation aids the Central Bank of Egypt when shaping monetary policy to manage inflation.