eng Science and Education Publishing Journal of Finance and Economics 2328-7276 2017-09-08 5 5 211 218 10.12691/jfe-5-5-3 JFE2017553 article Samir AIT YAHIA 1 Tarek DJEDDI tarek.djeddi@gmail.com 2 Tayeb LOUAFI 2 Larbi Tebessi University, Tebessa, Algeria ENSSEA ex. INPS, Kolea, Algeria The aim of this paper is to estimate the long-run Equilibrium Real Exchange Rate (ERER) path using VECM approach, and assesses the degree of misalignment in Algeria. Based on annual data from 1980 to 2015, our results show that the macroeconomic variables such as terms of trade, trade openness, differential productivity with trading partners (Balassa-Samuelson effect), real price of oil, and government expenditures, plays significant role in determining the equilibrium of Algeria's ERER, the results also reveal that Algerian economy suffered from RER misalignment. As finding, and according to the Edwards' [6] Model and the Cashin's [2] model, results showed same evidences that there are three episodes of undervaluation of the Algerian dinar's and also three episodes of overvaluation, the seventh episode (2004-2015) shows that the Actual ERER appears to have been close to its estimated equilibrium. http://pubs.sciepub.com/jfe/5/5/3/jfe-5-5-3.pdf equilibrium real exchange rate misalignment error correction mechanism dinar Algeria