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214551

The Impact of Monetary Policy Tools on Investment and Its Reflection on the Egyptian Agricultural Sector Using GARCH Model

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Last updated: 24 Dec 2024

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Abstract

Despite the efforts made by Egypt to activate and develop domestic investment and attract more FDI through enacting legislation, strengthening infrastructure, establishing industrial and economic investment zones, and trying to create an economic environment that attracts FDI, the economic returns of these measures are still not reflected in the economic sectors significantly. Its results were not clear through an improvement in the level of individual incomes or a decrease in the rates of poverty, inflation and unemployment, or an increase in the efficiency and productivity of the Egyptian economy represented by an increase in the rate of economic growth and the maximization of domestic product.As the improper use of monetary policy tools by the monetary authority motivated by control of the money supply to achieve economic balance through increased taxes and interest rates and an increase in the exchange rate led to a shrinkage in the volume of real domestic investment and a decline in incoming foreign investment. Which leads us to wonder whether monetary policy, with its tools and operational and intermediate objectives, has a positive stimulating effect on investment in general and agricultural investment in particular, as a major and influential sector in the national economy? Hence, the research aims to identify the effectiveness of monetary policy variables in attracting investment, and its impact on the Egyptian agricultural sector, the impact of monetary policy tools on agricultural investment. It was based on the research the use GARCH Model, in order to test the hypothesis of whether monetary policy, with its tools and operational and intermediate objectives, has a positive stimulating effect on investment in Egypt. The results showed the significance of the estimated model for all variables, as it was found that an increase in the total real domestic liquidity and real credit by about one billion pounds leads to an increase in investment by about 0.55 and 0.51 billion L.E each and that the decrease in the real interest rate by about 1% leads to an increase in investment. The investment is 2.3%. Relevant to the results, it is clear that despite the positive impact of credit on investment, this credit is not available due to the crowding out of the government sector with the private sector. Regarding the impact of these results on the agricultural sector, it was found from the estimation of the standard model that the real agricultural investment increased by 0.12 and 0.48 billion L.E. each, respectively, while the real interest rate and the inflation rate decreased by about 1%, which leads to an increase in real agricultural investment by about 0.34. 0.24 Billion L.E each, respectively. The research recommends the necessity of following an appropriate monetary policy to stimulate and grow domestic investment and attract foreign investment by reducing interest rates, providing credit, and not competing with the private sector in obtaining credit, and reducing inflation. With a focus on the productive sectors that are active in increasing production, such as the agricultural and industrial sectors, in order to reduce inflation.

DOI

10.21608/ejar.2022.110882.1183

Keywords

Monetary policy, Agricultural investment, exchange rate, GARCH Model

Authors

First Name

Doaa

Last Name

Soliman

MiddleName

Mamdouh

Affiliation

Department of Finance and Agricultural Cooperation Research, Agricultural Economics Research Institute(AERI), Agricultural Research Center (ARC)

Email

doa_mamdouh@yahoo.com

City

-

Orcid

0000-0003-4283-5017

Volume

100

Article Issue

1

Related Issue

30602

Issue Date

2022-03-01

Receive Date

2021-12-12

Publish Date

2022-03-01

Page Start

49

Page End

67

Print ISSN

1110-6336

Online ISSN

2812-4936

Link

https://ejar.journals.ekb.eg/article_214551.html

Detail API

https://ejar.journals.ekb.eg/service?article_code=214551

Order

6

Type

Original Article

Type Code

1,041

Publication Type

Journal

Publication Title

Egyptian Journal of Agricultural Research

Publication Link

https://ejar.journals.ekb.eg/

MainTitle

The Impact of Monetary Policy Tools on Investment and Its Reflection on the Egyptian Agricultural Sector Using GARCH Model

Details

Type

Article

Created At

22 Jan 2023