The Equilibrium Real Exchange Rate in a Commodity Exporting Country: Algeria's Experience

19 Pages Posted: 3 Mar 2006

Date Written: July 2005

Abstract

Drawing on the existing literature, I estimate a long-run equilibrium real exchange rate path for Algeria. I find that the Balassa-Samuelson effect together with real oil prices explain the long-run evolution of the equilibrium real exchange rate in Algeria. The half-life of the deviation of the real exchange rate from the estimated equilibrium level is about nine months, similar to that in other commodity-exporting countries. The general conclusions are that: (i) there is a time-varying long-run equilibrium exchange rate in Algeria as in other commodity-exporting countries; and (ii) the real effective exchange rate of the Algerian dinar at end-2003 was broadly in line with this equilibrium.

Keywords: Algeria, equilibrium real exchange rate

JEL Classification: F31, F41

Suggested Citation

Koranchelian, Taline, The Equilibrium Real Exchange Rate in a Commodity Exporting Country: Algeria's Experience (July 2005). IMF Working Paper No. 05/135, Available at SSRN: https://ssrn.com/abstract=888004

Taline Koranchelian (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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