Measuring the Sources of Inflation in the Algerian Economy During the Period 1990–2023.

Abstract

This study aims to analyze the determinants of inflation in the Algerian economy during the period 1990–2023 using the Autoregressive Distributed Lag (ARDL) model to explore both short- and long-run relationships. The analysis relies on official annual data and includes three explanatory variables: the rediscount rate, trade openness, and money supply growth, with the inflation rate as the dependent variable. The results reveal a long-run equilibrium relationship between inflation and these variables. Both the rediscount rate and money supply growth have a positive effect on inflation, while trade openness helps mitigate inflationary pressures. The Error Correction Model (ECM) indicates a short-run adjustment speed of approximately 70.66%, reflecting a relatively quick correction of short-term deviations. The study concludes that the rediscount rate is limited in effectiveness as a monetary policy tool to control inflation. It recommends coordinated fiscal and monetary policies, structural reforms, and expanding productive trade openness to stabilize prices and promote sustainable economic growth.