The impact of currency devaluation policy on the non-hydrocarbon export sector in Algeria.

Abstract

This study seeks to examine the effects of local currency devaluation policies on Algeria’s non-hydrocarbon export sector, as one of the monetary policies employed by Algeria to mitigate budget deficits and compensate for revenue losses following oil crises. The analysis draws on annual data covering local currency exchange rates and non-hydrocarbon exports from 1994 to 2023. Econometric methods, including stationarity tests, were applied to ensure data accuracy and to understand the stability of variables over time. A cointegration test was also conducted to examine whether a long-term relationship exists between the variables, revealing no such relationship. Consequently, the Vector Autoregressive (VAR) model was used to further analyze the dynamic interactions between variables. Results indicate no statistically significant impact of local currency devaluation on non-hydrocarbon exports, highlighting a weak correlation between monetary policies and non-hydrocarbon export performance. These findings provide critical insights for Algerian policymakers, emphasizing the need to consider additional factors that may influence this vital sector outside of traditional monetary policy approaches.