مجلة دفاتر اقتصادية
Volume 16, Numéro 2, Pages 176-192
2025-11-25

Re-exploring The Financial Development–economic Growth Nexus In Algeria: New Insights From A Structural Break Cointegration Approach (1980–2023)



Authors : Yousfi Elhousseyn . Hamrit Abdelatif .

Abstract

This paper reassesses the long-run nexus between financial development and economic growth in Algeria over the period 1980–2023. Economic growth is proxied by per capita GDP, while financial development is measured by broad money supply and credit provided to the private sector, with investment included as a control variable. The analysis employs econometric techniques, notably stationarity and cointegration tests that account for structural breaks. The Gregory–Hansen test confirms the existence of a long-run equilibrium relationship with a structural break among the variables. Furthermore, long-run estimates based on the fully modified ordinary least squares (FMOLS) method indicate that broad money supply and investment exert positive and significant effects on economic growth, whereas credit provided to the private sector has a negative impact. These findings highlight the fragility of Algeria’s financial sector and underscore the need to reconsider its role in supporting economic policy objectives, particularly sustainable growth.

Keywords

Financial Development, Economic Growth, Algeria, Gregory–Hansen Test, FMOLS

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