The Impact of the General Level of Prices and the Real Cash Balances Algerian Dinar Exchange Rate During the Period (1990-2013)

Boulkour Nourdeddine

Abstract


This study aims to measure and analyze the impact of the general price level and real cash balances on the Algerian dinar exchange rate against the US dollar by using partial adjustment model during the period (1990- 2013), and for this purpose has been estimated this model, which includes four variables: The index ofconsumerOsarCPI_t, cash balances fact RM_t, the nominal exchange rate for the period (t) RM_t, the nominal exchange rate for the period (t-1) ER_(t-1), and as is well known, the data Time series, often suffer from autocorrelation problem so subjected these variables to test all of: (Durbin-h), Fisher (F), Student (T), where these tests showed that the multiple regression model does not suffer from autocorrelation between residuals problem Considering that h took 0.306 value which is less than the value of Z is scheduled where to take the latter 1.96 value at the moral level of 0.05, and the form in its entirety with a statistically significant because in this context the value of Fisher calculated F = 242.9725 which is greater than the value of Fisher Scheduled 〖(F〗_(3,21)^0.05=3.05), Add to that that the model does not suffer from the problem of multi-linear as each of the monetary variables, parameters LCPI, LRM, LER_(t-1)، as the value of moral t- calculated each student 2.28888, 3.340706-, 3.554824 in a row, the largest of t-student Scheduled 〖(t〗_21^0.05=1.721)at 0, 05 moral level. This study found that every change in the general price level by 1% resulting in a change in the exchange rate by 0.66%, indicating that the exchange rate a little flexibility for the general level of prices in the short term, but for real cash balances, the impact on the exchange rate in the short term it is very weak and much lower than those caused by the change in the general price level that. However, by estimating the long-term elasticities become a flexible exchange rate for the general level of prices, since the general level of prices change by 1% leads to a change in the exchange rate at 1.017597% and in the same direction.

Keywords


exchange rate, the real cash balances, the general price level, the partial adjustment model.

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