Analyzing the response of economic growth to monetary policy instruments: The case of Algeria (1990–2024) using the QARDL approach
Keywords:
monetary policy, economic growth, quarterly data, QARDL model, AlgeriaAbstract
This study aims to analyze the response of economic growth to monetary policy instruments in Algeria during the period 1990–2024, focusing on heterogeneity across different growth states, using the quantile accelerated regression with distributed lag (QARDL) methodology. The study relies on quarterly data for a set of key monetary variables, including the exchange rate (tch), interest rate (ir), foreign reserves (cr), and broad money (m2). The results show clear nonlinear relationships in the long term between monetary policy instruments and economic growth, with the exchange rate having a negative and insignificant effect at the lower quantile (0.25) and more negative at the medium (0.50) and high (0.75) quantiles, reflecting the sensitivity of growth to exchange rate fluctuations in cases of medium and high economic performance. In contrast, the short-term results revealed limited positive effects of the exchange rate across different quantiles, indicating a degree of short-term flexibility. The study concludes that it is necessary to enhance the effectiveness of monetary policy instruments, improve the flexibility of the monetary framework, and develop financial markets, thereby supporting the ability of monetary policy to stimulate economic growth in Algeria.
Downloads
References
Aid, L., & Benelbar, M’. (2023). Study of the standard relationship between the money supply and the exchange rate in Algeria during the period 1990–2020. Financial Markets, Institutions and Risks, 7(2), 56–71. https://doi.org/10.21272/fmir.7(2).56-71.2023
Bernanke, B. S., & Gertler, M. (1995). Inside the black box: The credit channel of monetary policy transmission. Journal of Economic Perspectives, 9(4), 27–48. https://doi.org/10.1257/jep.9.4.27
Bleaney, M. F., & Greenaway, D. (2001). The impact of terms of trade and real exchange rate volatility on investment and growth in Sub Saharan Africa. Journal of Development Economics, 65(2), 491–500. https://doi.org/10.1016/S0304-3878(01)00147-X
Bouhassoun, H. (2024). Evaluating the effectiveness of the exchange rate channel in transmitting the impact of monetary policy to inflation in Algeria: From 1990–2017 – An econometric study. International Journal of Economics and Public Policy, 7(1), 221–236. https://doi.org/10.54241/2065-007-001-012
Cho, J. S., Kim, T. H., & Shin, Y. (2015). Quantile cointegration in the autoregressive distributed lag model. Journal of Econometrics, 188(1), 281–300. https://doi.org/10.1016/j.jeconom.2015.05.003
Fisher, I., & Brown, H. G. (1911). The purchasing power of money: Its determination and the relation of prices to foreign exchange and the theory of taxation (2nd ed.). New York, NY: The Macmillan Company. [Public domain edition]
Hsu, T. K. (2017). The stock price of China and the exchange rate: A quantile autoregressive distributed lag model. WSEAS Transactions on Business and Economics, 14, 81–86. Retrieved from https://www.wseas.org/multimedia/journals/economics/2017/a185807-556.pdf
Keynes, J. M. (1936). The general theory of employment, interest, and money. London, UK: Macmillan. Retrieved from https://archive.org
Khelifa, A., & Bekkouche, A. (2021). The impact of monetary policy on economic activity in Algeria during 1980–2019. Revue des Sciences Économiques, 11(2). https://asjp.cerist.dz/en/downArticle/126/11/2/175471
Koenker, R., & Bassett, G. (1978). Regression quantiles. Econometrica, 46(1), 33–50. https://doi.org/10.2307/1913643
Mishkin, F. S. (2011). Monetary policy strategy: Lessons from the crisis. NBER Working Paper No. 16755. National Bureau of Economic Research. https://doi.org/10.3386/w16755
Mohanty, M. S., & Klau, M. (2005). Monetary policy rules in emerging market economies: Issues and evidence. In R. J. Langhammer & L. V. Souza (Eds.), Monetary policy and macroeconomic stabilization in Latin America (pp. 205–245). Springer. https://doi.org/10.1007/3-540-28201-7_13
Montiel, P. J. (1990). The transmission mechanism for monetary policy in developing countries. IMF Working Paper No. 90/047. International Monetary Fund. https://doi.org/10.5089/9781451972801.001
Mundell, R. A. (1971). A graphical analysis of the effects of monetary policy on exchange rates and the terms of trade. Scandinavian Journal of Economics, 73(2), 160–171. https://doi.org/10.2307/3439626
Obstfeld, M., & Rogoff, K. (1996). Foundations of international macroeconomics. Cambridge, MA: MIT Press. https://mitpress.mit.edu/9780262032017/foundations-of-international-macroeconomics/
Pesaran, M. H., & Shin, Y. (1998). An autoregressive distributed lag modelling approach to cointegration analysis. In S. Strøm (Ed.), Econometrics and economic theory in the 20th century: The Ragnar Frisch Centennial Symposium (pp. 371–413). Cambridge: Cambridge University Press. https://doi.org/10.1017/CCOL0521633230.011
Plebani, G., & Gbohoui, W. (2025). Enhancing monetary policy transmission in Algeria. IMF Selected Issues Paper No. 2025/131. International Monetary Fund. https://doi.org/10.5089/9798229026376.018
Schumpeter, J. A. (1934). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle (English translation; original work published 1911). Cambridge, MA: Harvard University Press. Retrieved from https://archive.org
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 The International tax journal
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
