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Hard currency inflows and sterilization policy in Algeria: An ARDL approach

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  • Aissa DJEDAIET

    (University of Larbi Ben M’hidi Oum El Bouaghi, Algeria)

  • Hicham AYAD

    (University of Abu Bakr Belkaid Tlmecen, Algeria)

Abstract

This paper aims to explore to what degree the Algerian Bank sterilized hard currency inflows using monthly data covering the period January 2002-December 2016, by estimating a sterilization coefficient in both long and short run terms using and ARDL approach, and also by applying a TYDL Granger causality to investigate the relationship among concerned variables. Our results showed that there are four co-integration vectors among the variables, and the evidence suggested that the sterilization coefficient is equal to -0.99, i.e. near to the minus one (-1) which indicates the full sterilization (Algerian Bank roughly sterilizes 99% of the frequent hard currency inflows in both short-run and long-run terms). Indeed, the results also indicated that there are three unidirectional causalities running from Algerian bank’s net domestic and foreign assets to the money multiplier and from the latter to the interest rate.

Suggested Citation

  • Aissa DJEDAIET & Hicham AYAD, 2017. "Hard currency inflows and sterilization policy in Algeria: An ARDL approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(612), A), pages 83-96, Autumn.
    • Handle: RePEc:agr:journl:v:3(612):y:2017:i:3(612):p:83-96
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    References listed on IDEAS

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    1. Aissa Djedaiet & Hicham Ayad, "undated". "The double whammy of COVID-19 and oil price collapse: Spillover effects on inflation and exchange rates," Review of Socio - Economic Perspectives 202206, Reviewsep.
    2. Djedaiet Aissa & Ayad Hicham, 2022. "Hard currency inflows and sterilization policy in Algeria," SN Business & Economics, Springer, vol. 2(9), pages 1-16, September.
    3. Hicham Ayad & Ousama Ben-Salha & Miloud Ouafi, 2023. "Do oil prices predict the exchange rate in Algeria? Time, frequency, and time‐varying Granger causality analysis," Economic Change and Restructuring, Springer, vol. 56(5), pages 3545-3566, October.
    4. Ayad Hicham, 2021. "Oil Prices and the Algerian Exchange Rate: Is there any Difference with Hidden Co-Integration?," Folia Oeconomica Stetinensia, Sciendo, vol. 21(1), pages 1-17, June.

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