Authors : Yasmine Mohie El Din Gharieb, Samy El Sayed and Fakhry El Din Ali Alfiky
Abstract: The 2008 global financial crisis has raised concerns about potential impact of the shadow banking system on monetary system of a country. By utilizing Prais-Winsten regression and regression with Newey-West standard error, the study examines the possible impact of the shadow banking system on inflation and effectiveness of the monetary policy in Egypt using a quarterly data during the period 2008-2014. Based on the five shadow banking functions classified in the Financial Stability Board report of the International Monetary Fund in 2015, the study contributes to the existent literature by introducing a new composite measure of activities of the shadow banking system in Egypt. The study found a positive and statistically significant impact of activities of the shadow banking system on inflation but a negative and statistically significant impact on effectiveness of the monetary policy measured by the inflation gap. The study concluded that coordination between the monetary authority and financial supervisory authority which supervises and regulates shadow banking activities in Egypt is necessary. Moreover, the monetary authority should consider the shadow banking activities when planning and conducting the monetary policy.
Yasmine Mohie El Din Gharieb, Samy El Sayed and Fakhry El Din Ali Alfiky, 2017. Growth of the Shadow Banking System and Effectiveness of the Monetary Policy in Egypt: An Empirical Analysis. The Social Sciences, 12: 1344-1352.