Estimating The Equilibrium Real Exchange Rate For Algeria.

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Université de M'sila مجلة اقتصاديات الاعمال والتجارة Volume 8, Numéro 2, Pages 396-407
The purpose of this study is to investigate the long run path of equilibrium real exchange rate in Algeria as a response to some fundamental variables, which are; productivity differentials relative to trading partners, real prices of oil and government spending. A data sample of annual frequency running from 1980 to 2018 is used to analyze this relationship via JOHANSEN cointegration technique. Although all variables were significant in this study, Algeria's real exchange rate was found to be mostly driven by productivity differentials relative to trading partners and government spending, Furthermore, the study also found that equilibrium real exchange rate is not constant as would be implied by theory, but, rather it is time varying process that depends strongly on the chosen fundamental variables.