Interactions Between Exchange Rate Inflation and Economic Growth in Algeria An ARDL Analysis of Short- and Long-Run Dynamics (1970–2021)

Abstract

This paper investigates the dynamic relationships between economic growth, the Algerian dinar exchange rate, and the inflation rate in Algeria using an ARDL model applied to annual data from 1970 to 2021, sourced from the Bank of Algeria and the National Office of Statistics. The study has two primary objectives: first, to assess the short- and long-term dynamics among these three variables; second, to provide an analytical evaluation of the effectiveness of economic policies implemented by the Algerian government. The findings reveal multiple dynamic interactions between economic growth, the exchange rate, and inflation. Moreover, the ARDL analysis suggests that the lack of a diversified and efficient national productive base beyond the hydrocarbons sector limits the effectiveness of public development interventions in enhancing Algeria’s economic performance