The Taylor Rule in Egypt: Is it Optimal? Is there Equilibrium Determinacy?

We investigate Egypt's Taylor rule (interest rate targeting) between 1976 and 2019 by including the main economic variables in its reaction function. Using principle, we Egypt’s monetary policy optimality. To this end, conduct generalized method of moments (GMM) estimation procedure with different specifications to deal potential endogeneity among variables. Our GMM estimates reveal that partial adjustment coefficient is considerable magnitude, indicating explanatory power inertia on many total variations current values nominal interest Egypt. Furthermore, inflation gap violates making procyclical "spiral" inducing divergence from long-run equilibrium. Therefore, rule, thus policy, reflects indeterminacy equilibrium a passive destabilizing policy. Besides, output was unexpectedly found be insignificant.