This study examines the impact of currency devaluation on macroeconomic stability in Egypt by using a Structural Vector Autoregression (SVAR) model. It focuses on the interactions between exchange rate movements, inflation, GDP, and interest rates over the period [1974-2023]. By applying this model, we identify structural shocks and analyze their effects on key macroeconomic variables. The findings reveal that currency devaluation leads to higher inflation in the short term and contributes to adjustments in interest rates as a tool to mitigate inflationary pressures in the medium and long terms. However, its impact on the real GDP and interest rates appears to be limited and depends on the prevailing monetary policy during that period. This study highlights the importance of coordinated economic policies in mitigating the adverse effects of devaluation and promoting economic resilience. It also presents an executive plan for policies aimed at balancing exchange rate flexibility with macroeconomic stability in Egypt.
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