Thesis (Ph.D.) - Cairo University - Faculty of Economics and Political Science - Department of Economics

This thesis investigates Egypt{u2019}s macroeconomic management during 1991{u2014}2018, as viewed through the lens of the 2Impossible Trinity3; a theory which stipulates that a country cannot simultaneously pursue the three policy objectives of 2exchange rate stability3, 2perfect capital mobility3 and 2monetary autonomy3. This thesis analytically and empirically assesses each element of the impossible trinity for the Egyptian case, and sheds light on the extent to which Egypt{u2019}s policy combinations contributed to the country{u2019}s recurrent macroeconomic imbalances. It is shown that Egypt has maintained an imperfect degree of de facto international financial integration during the period under study. Nevertheless, capital mobility in Egypt has been sufficiently large and volatile, which {u2013} in the context of a stabilized exchange rate {u2013} has undermined (weakened) monetary autonomy. The analysis in this thesis shows how the Central Bank of Egypt (CBE) has been deploying various instruments to manage liquidity during the episodes of large capital flows, using Treasury bills and bonds in the 1990s, and through open market operations using deposit and repo auctions since the early-2000s. Indeed, the CBE{u2019}s liquidity management has been mirroring the developments in the capital and financial account of Egypt{u2019}s Balance of Payments

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