Abstract: This study aims to examine the relationship between the money supply and the exchange rate in
Algeria between 1990 and 2020. We analyze the economic conditions that characterized this period, including
the shift from a directed economy to a market economy, as well as Algeria's participation in the International
Monetary Fund and World Bank programs. To understand the impact of the exchange rate on the money
supply in the short and long term, we utilize the Engel-Granger co-integration method. We employ (Auto
Regressive Distributed Lag/ARDL) model to measure the relationship between the two variables. Our findings
indicate that there is a statistically significant positive effect of the money supply on the exchange rate at a
1% significance level (P=0.001 < 0.01). The limits tests for co-integration through F-statistic also indicate
co-integration between the exchange rate and money supply, aligning with economic theory. During the postreform
period (2000-2014), we observe that net foreign assets played a marginal role in covering the
monetary mass compared to state and economy loans, which continuously increased, particularly since 2009.
It is important to note that our study relies on comprehensive and reliable data from official sources that
collect economic data in Algeria. Additionally, economic assumptions may impact our results and may not be
applicable in all cases. Nonetheless, our study contributes to the existing literature on the relationship
between the money supply and the exchange rate and sheds light on the specific case of Algeria.
Citation
Lamine AID ,
, (2023-12-15), 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 (FMIR),
Vol:7, Issue:2, pages:56-71, sumy state university
