The Algerian Exchange Rate Determinants

Abstract

The exchange rate is the key relative price in international finance .This paper indentifies the main determinants of real exchange rate in Algeria from 1974 to 2013. For that purpose we tried to apply El badawi’s (1998) model which include (the real effective exchange rate, Termes of trade , openness and foreign exchange reserves) to the Algerian dinar using a Vector autoregressive model ‘VAR’ . Our results show that mouvement in terms of trade and oppenness are very important in explaining the real effectif exchange rate in Algeria