Real exchange rate in countries exporting raw materials The case of Algeria

Abstract

  This study aims at shedding light on the fundamental determinants of the real exchange rate in countries that rely on raw materials such as Algeria in an attempt to implement the Cashin et al's model during the period 1980-2016. Therefore, we will use the method of cointegration to determine whether there is a long-term relationship between the real exchange rate and its determinants.

  The results showed that there is a long-term equilibrium relationship between the variables in the long term, as the differences in productivity and terms of trade proved statistically insignificant according to the model whereas the real oil price has a significant and negative impact on the real exchange rate, which confirms that the Algerian economy is a rental economy.

  The error correction model (VECM) showed that the model was not accepted for the non-negative error correction coefficient, which means that there is no relationship between the model's variables in the short term.