مجلة إضافات إقتصادية
Volume 9, Numéro 2, Pages 726-747
2025-09-30
Testing Frankel's Monetary Model In Algeria Evidence From 1995 To 2023
Authors : Elmerahi Bachir . Benbayer Habib .
Abstract
Abstract: This paper examines short- and long-term drivers of exchange rate movements using the ARDL model. Drawing on monetary and output-based theories, it includes key variables: relative money supply, income differentials, and interest rate spreads. A stable long-run cointegrating relationship is confirmed. Domestic money expansion depreciates the local currency, while higher domestic income strengthens it. Interest rate differentials show no significant long-term effect but influence short-term fluctuations. The error correction term indicates a rapid return to equilibrium. Short-term dynamics also reflect lagged effects of money supply and income. Results align with uncovered interest parity. Diagnostic tests confirm model stability. The study highlights the need for sound monetary policy and balanced growth to maintain exchange rate stability.
Keywords
Exchange Rate ; Monetary Fundamentals ; Interest Rate ; ARDL ; Algeria
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