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Year 2023, Volume: 32, 39 - 54, 30.11.2023
https://doi.org/10.55549/epess.1412792

Abstract

References

  • Agénor, P. R. (1990). Parallel currency markets in developing countries: theory, evidence, and policy implications. Evidence, and Policy Implications (December 1990). IMF Working Paper, (90/114).
  • Aron, J., & Elbadawi, I. (1992). Parallel markets, the foreign exchange auction, and exchange rate unification in Zambia. https://ora.ox.ac.uk/objects/uuid:51dfd481-d7c3-4079-a33e-cc618b9676e1
  • Blejer, M. (1978). Black market exchange rate expectations and the domestic demand for money: some empirical results. Journal of Monetary Economics, 4(4), 767-774.

Black Market Exchange Rate and Macroeconomic Performance in Algeria: What Impact?

Year 2023, Volume: 32, 39 - 54, 30.11.2023
https://doi.org/10.55549/epess.1412792

Abstract

Excessive control on foreign exchange market undertaken by Algerian government for nearly four decades has led to black market for foreign currencies. As a consequence, two exchange rates (official and black) coexist and operate simultaneously. Despite its negative impact on the Algerian economy, black market exchange rate has not, so far, attracted attention of researchers. The aim of this paper is twofold. First, it attempts to highlight the determinants of the black market exchange rate premium in Algeria over the period 1980- 2016. Second, the impact of such premium on Algerian macroeconomic performance is assessed by focusing on the main macroeconomic indicators, these are namely; economic growth, inflation, foreign direct investment and balance of payment. Our empirical results point out that variables such as money supply, terms of trade, economic growth and real exchange rate affect significantly the black market exchange rate premium. Furthermore, the results reveal a harmful effect of the black market exchange rate premium on the Algerian macroeconomic performance. This effect was captured by using Impulse response functions (IRF) which show the premium’s negative shock on economic growth, foreign direct investment and balance of payment. Inflation was however, positively affected. The same effect was found when a variance analysis was introduced. According to the above mentioned results, this paper contributes to the existing literature on the black market for foreign currencies. As far as policy makers are concerned, the gap between the two rates should be narrowed by means of reducing the demand for foreign currencies or unifying the two rates. Finaly, the phenomenon of black market exchange rate has to be taken into account when drawing monetary and fiscal policies in Algeria.

References

  • Agénor, P. R. (1990). Parallel currency markets in developing countries: theory, evidence, and policy implications. Evidence, and Policy Implications (December 1990). IMF Working Paper, (90/114).
  • Aron, J., & Elbadawi, I. (1992). Parallel markets, the foreign exchange auction, and exchange rate unification in Zambia. https://ora.ox.ac.uk/objects/uuid:51dfd481-d7c3-4079-a33e-cc618b9676e1
  • Blejer, M. (1978). Black market exchange rate expectations and the domestic demand for money: some empirical results. Journal of Monetary Economics, 4(4), 767-774.
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Details

Primary Language English
Subjects Other Fields of Education (Other)
Journal Section Articles
Authors

Abdelnacer Bouteldja This is me

Simohamed Faıza This is me

Early Pub Date December 31, 2023
Publication Date November 30, 2023
Published in Issue Year 2023 Volume: 32

Cite

APA Bouteldja, A., & Faıza, S. (2023). Black Market Exchange Rate and Macroeconomic Performance in Algeria: What Impact?. The Eurasia Proceedings of Educational and Social Sciences, 32, 39-54. https://doi.org/10.55549/epess.1412792