Exchange Rate Policy, Transportation Costs, and Inflation Dynamics: Implications for Sustainable Economic Management in Egypt

Abstract

Purpose: This study focuses on determining the impact of exchange rate policy on transportation costs and inflation dynamics in Egypt, with implications on sustainable economic management.

Design/methodology/approach: Using annual time-series data (2014-2023) from the Central Bank of Egypt, World Bank and International Monetary Fund (IMF), we use regression analysis techniques to estimate the effects of real interest rates, official exchange rates and exchange rate liberalisation on the Consumer Price Index for Transportation.

Findings: Real interest rates significantly predict transportation costs (B=4.75, p<0.01). Exchange rate liberalisation has the biggest coefficient (beta=0.525) but it is not statistically significant, indicating the multicollinearity problem or low power. The official exchange rate does not matter a great deal. Descriptive statistics show high levels of volatility in all the indicators after devaluations.

Originality/value: This study advances the literature by isolating transportation costs as a distinct exchange rate transmission mechanism in Egypt and examining its sustainability implications.

Practical implications: Policy-makers should co-ordinate exchange rate flexibility with monetary policy, diversify energy inputs, and strengthen social safety nets.

Research limitations: Small sample size and single-country focus limit generalisability.