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

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 investi...

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Bibliographic Details
Published in:Folia oeconomica stetinensia 2021-06, Vol.21 (1), p.1-17
Main Author: Ayad, Hicham
Format: Article
Language:English
Subjects:
asymmetric relationships
Business Economy / Management
C32
Developing countries
Economy
Exchange rate
F31
Financial Markets
Foreign exchange rates
Hidden co-integration
LDCs
National Economy
Oil prices
Petroleum
Prices
Q43
Research methodology
Supranational / Global Economy
Transport / Logistics
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Summary: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.
ISSN:1730-4237
1898-0198
1898-0198
DOI:10.2478/foli-2021-0001