les cahiers du mecas
Volume 22, Numéro 1, Pages 225-239
2026-06-02
The Dynamics Of The Algerian Balance Of Payments And Net Demand: An Empirical Analysis (1990–2024)
Authors : Okbi Lakhdar . Chedad Mohamed .
Abstract
This article examines how net demand (FD) affects Algeria’s balance of payments (BOP) from 1990 to 2024, testing the empirical relevance of Keynesian theory in a developing-country. Employing an Error Correction Model (ECM), it identifies both long-run and short-run dynamics between the variables and measures the velocity at which the system reverts to equilibrium following exogenous shocks. The empirical findings point to a significant long-run equilibrium, with FD accounting for about 94% of long-term fluctuations and 93 % of short-term variation in the BOP. The estimated error correction term (ECT) implies a convergence speed of 59.164 % per year, which suggests that deviations from equilibrium tend to be corrected in roughly 1.69 years. Standard diagnostic checks and stability tests support the reliability of these estimates. On this basis, the study recommends incorporating demand-side factors into macroeconomic policy design and implementing high-frequency monitoring of external balances using dynamic modelling techniques
Keywords
Net Demand, Balance of Payments, Error Correction Model (ECM), Algeria, Cointegration
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