Demand-side Determinants of Inflation in Egypt: A Dynamic Analysis

Over time, inflation has become one of the most pressing issues. Egypt's inflation is driven by a variety of causes. This paper analyzes several factors that impact inflation in Egypt and emphasizes the effect of the demand-side on inflation using annual data from 1960 through 2020. The variables investigated are gross national expenditure, broad money, the imports of goods and services, and gross domestic products. The variables under investigation are integrated into I(0) and I(1) as per the "Augmented Dickey-Fuller (ADF) and Phillips-Perron unit root tests", which justifying the adoption of the "Autoregressive Distributed Lag Model (ARDL)" approach. Using the ARDL co-integration technique, the empirical findings show a short- and long-run connection amid some of the independent variables and inflation. The findings show that the supply of money, gross national expenditure, and the growth rate of imports have a substantial short and long-term influence on inflation but the gross domestic product has no influence in the both the short- and long-term. The study concludes that demand-side inflation is still perceived as one of the most significant inflation determinants. Since the R-square value is almost 60%, there are various factors that might influence Egyptian inflation besides the previous factors.