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

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.
Publication date: July 2005
ISBN: 9781451861549
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Money and Monetary Policy , Money and Monetary Policy , International - Economics , International - Economics , equilibrium real exchange rate , exchange rate , real exchange rate , exchange rates , real effective exchange rate , effective exchange rate , Open Economy Macroeconomics

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