the relationship between Gross Fixed Capital Formation and economic growth in Algeria

Abstract

This study mainly aims to examine the relationship between investment measured by (GFCF) and economic growth in Algeria in the period 1980-2016. To achieve this goal, the study is divided into two parts: the first one is theoretical; whereas, the second part is dedicated for the econometric study of the relationship between Gross Fixed Capital Formation and economic growth by using the quantitative techniques and econometric tools through the application of (VAR) methodology. In this context, we have used the test of Dickey-Fuller for Stationarity, and Granger causality and the theory of co-integration. The results reveal a lack of evidence of an equilibrium relationship in the long term between Gross Fixed Capital Formation and economic growth in Algeria during the period of the study. Moreover, the findings show that there is trace of causality running from economic growth to Gross Fixed Capital Formation. They are confirmed by the tests of variance decompositions and impulse response functions.