The Impact of Oil Price Fluctuations and Inflation on Economic Growth in Algeria: An Econometric Study over the Period 1990–2025

Abstract

The goal of this research is to create an econometric model that investigates how the changes in oil prices and inflation affect economic growth in Algeria. In general theoretical terms, it is suggested that a relationship exists between all these mentioned variables. From the perspective of the estimation results obtained by applying the Autoregressive Distributed Lag model, it can be stated that in the long run, there are strong positive connections between economic growth and oil prices, while inflation negatively influences economic growth. The obtained results verify the rentier economy nature of the Algerian economy, where oil is the key source of financing all kinds of economic activities. The only problem that can arise is connected to inflation that diminishes the positive impact of oil on the economy by reducing purchasing power and increasing prices in production, thus discouraging investment. Therefore, it is critically necessary to invest oil revenues to get sustainable economic growth.