Oil Prices and the Algerian Exchange Rate: Is there any Difference with Hidden Co-Integration?

Abstract

Research background: The aim of this paper is to examine the long run relationship among oil prices and the Algerian Dinar exchange rate over the period January 1995–February 2020 in Algeria as one of the most important oil-exporting countries and one of the OPEC members. Purpose: This study investigated the co-integration relationship between oil prices and exchange rate in Algeria by testing the long-run relationship between the two variables and their positive and negative shocks. Research methodology: the study applied both the traditional co-integration analysis using Engle-Granger, Phillips-Ouliaris and Johansen-Juselius tests and the hidden co-integration presented by Granger and Yoon (2002). Results: The results revealed that there is no evidence of a co-movement and linkage between oil prices and exchange rate in Algeria over the period of study neither with the original series nor between the cumulative components whatever the dependent variable. Novelty: This paper fills in the missing link between the Algerian Dinar exchange rate and oil prices especially with the absence of the hidden co-integration analysis in the case of Algeria and most of the developing countries. To deal with the oil shocks according to Apergis and Miller (2007) and Narayan and Gupta (2015) studies where when they suggested distinguishing between the negative and positive oil price shocks because the asymmetric effect on the macroeconomic variables.

Modelling the Equilibrium Real Exchange Rate: Evidence from Oil-Exporting Country

“…The results showed that oil supply shocks had a larger negative effect (depreciating) on exchange rates in oil exporters than in importers countries. Recently, Ayad (2021) examined the relationship between oil prices and the Algerian Dinar exchange rate. Results showed that there was no long relationship between oil prices and exchange rate in Algeria.…”

Decline in Share Prices of Energy and Fuel Companies on the Warsaw Stock Exchange as a Reaction to the COVID-19 Pandemic

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