Balance of Payments as a Monetary Phenomenon: An ARDL Bounds Test Method for Algeria

Ghilous Azeddine () and Ziat Adel ()
Additional contact information
Ghilous Azeddine: Farhat Abbas University Setif1, Department of Economic Science, Marketing and Economic Studies and Research Laboratory (LERME), Setif, Algeria
Ziat Adel: Farhat Abbas University Setif1, Department of Economic Science, Marketing and Economic Studies and Research Laboratory (LERME), Setif, Algeria

Folia Oeconomica Stetinensia, 2023, vol. 23, issue 1, 64-86

Abstract: Research background Every country attempts to improve its balance of payments (BOP) position to enhance macroeconomic policy. Algeria, like many developing countries, is experiencing a BOP deficit. This raises concerns about the reasons for this deficit and prioritizes the quest for potential answers. Purpose In the context of the Monetary Approach to the balance of payments (MABP), this paper investigates the long-run relationship between domestic credit, inflation, interest rate, GDP, and net foreign assets to find whether BOP is a monetary phenomenon in Algeria from 1980 to 2019. Research methodology: The Autoregressive Distributed Lag (ARDL) bounds test, combined with the critical approximation p-values of Kripfganz and Schneider (2020), has been applied. Results The findings clearly showed a long-run relationship among the variables. The long-run estimates strongly supported MABP propositions, and domestic credit had a negative and statistically significant influence on net foreign assets. This suggests that Algeria’s BOP is a monetary phenomenon, and excess money supply played a crucial role in Algeria’s balance of payments disequilibrium. Novelty The contribution of this paper is the use of the ARDL bounds test in combination with the novel critical approximation p-values of Kripfganz and Schneider (2020), which provided more robust results. This study could help monetary authorities to elaborate the suitable policies in dealing with BOP problems in Algeria.

Keywords: Balance of Payments; Monetary Approach; Algeria; ARDL; Cointegration (search for similar items in EconPapers)
JEL-codes: C32 E12 E50 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/foli-2023-0004 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:foeste:v:23:y:2023:i:1:p:64-86:n:7

DOI: 10.2478/foli-2023-0004

Access Statistics for this article

Folia Oeconomica Stetinensia is currently edited by Waldemar Tarczyński

More articles in Folia Oeconomica Stetinensia from Sciendo
Bibliographic data for series maintained by Peter Golla ().