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Balassa, B. “The purchasing-Power Parity Doctrine: a Reappraisa”, Journal of Political Economy, 72, 584-96, 1964.

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Estimating the Equilibrium Real Exchange Rate in Algeria during the period: 1980-2015

1Larbi Tebessi University, Tebessa, Algeria

2ENSSEA ex. INPS, Kolea, Algeria

Journal of Finance and Economics. 2017, Vol. 5 No. 5, 211-218
DOI: 10.12691/jfe-5-5-3
Copyright © 2017 Science and Education Publishing

Cite this paper:
Samir AIT YAHIA, Tarek DJEDDI, Tayeb LOUAFI. Estimating the Equilibrium Real Exchange Rate in Algeria during the period: 1980-2015. Journal of Finance and Economics. 2017; 5(5):211-218. doi: 10.12691/jfe-5-5-3.

Correspondence to: Tarek  DJEDDI, ENSSEA ex. INPS, Kolea, Algeria. Email:


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.