Recent trends in the development of the dinar exchange rate in Algeria

Variables used in the Algerian model

Abstract

The Bank of Algeria continues to maintain an active policy of the directed floating exchange rate, aiming to maintain the real effective exchange rate close to its equilibrium level, and to reduce as much as possible the risks of deviations, resulting from fluctuations in oil prices and the exchange rate between the dollar and the euro, and during the years Recently, the equilibrium real exchange rate has improved, and it mainly reflects the sharp rise in state expenditures, and the resulting risks of negative effects, such as the “Dutch disease” type, on domestic economic well-being.
It remains for the monetary authorities in Algeria to know and determine the real effective exchange rate that is close to its equilibrium level, which achieves stability in the external current account. In 2010, the exchange rate policy allowed an improvement in the real effective exchange rate, in a period that witnessed a rise in fuel prices and Public expenditures have also increased, and in the context of monitoring the exchange rate policy, the authorities must make efforts to increase their capabilities in analyzing the exchange rate.