The effect of exchange rate changes on inflation in Algeria

Abstract

Through this study, we seek to find the impact of exchange rate changes on inflation using data in Algeria during the period 2008-2023 using modern econometric methods, starting with the stability test for time series, as the series under study are unstable and are integrated to the first degree, passing through the joint integration test, which proved the absence of a joint integration relationship between the variables under study, and thus the absence of a long-term relationship between the variables, then explaining the variance of the prediction error for all variables is due to them, and this is at a large rate exceeding 95%, in all cases, which is consistent with the absence of a causal relationship between the variables. We concluded that the relationship between them, which provides us with a measure of the sudden impact of inflation resulting from a shock in the exchange rate. The results of the study in the applied part concluded that there is a direct effect between the two variables, as whenever a shock occurs, even a slight one, in the exchange rate, it will have a clear effect on inflation