The exchange rate and the Algerian forgien Trade : What relationship? An Econometric Approach

Abstract

Algerian foreign trade has been suffering from a continuous deterioration in the last few years, the trade deficit was increased since 2015, causing severe problems that amounted to a structural budget deficit. Politicians and experts have tried to address the imbalances recorded at the trade balance, and opinions diverged on ways to reduce importations in order to equilibrate the Algerian trade balance. And by focusing on the solutions that were adopted, we found that most of them used the exchange rate to reduce the volume of importations, and despite that, the trade deficit continues, causing great damage to the entire Algerian economy, and this is why we prompted this study, asking about the effectiveness of relying on the exchange rate as a strategic mechanism to rebalance The Algerian trade balance and then the balance of payments, up to the state budget. The study started from a basic hypothesis that there is a causal relationship between the exchange rate and the trade balance, the result was critical; The Algerian foreign trade is responding to rules other than those that the economy in general and foreign trade in particular should follow, there is no causal relationship between the tow variables, and al previous approach to equilibrate the trade balance must be revised