The Impact of Fiscal and Monetary Policies on Economic Growth in Algeria: An Econometric Study Using the ARDL Model (2000–2024)

Abstract

This study investigates the impact of fiscal and monetary policies on economic growth in Algeria during the period 2000–2024. Adopting a descriptive-analytical approach to evaluate the theoretical framework and macroeconomic indicators, the study employs the Autoregressive Distributed Lag (ARDL) bounds testing approach and the Error Correction Model (ECM) to estimate the short- and long-run dynamic equilibrium relationships among the variables. The empirical findings confirm the existence of a robust long-run cointegrating relationship. The Error Correction Model reveals a negative and highly statistically significant error correction coefficient (ECT = -1.12) at the 1% level, indicating a high speed of adjustment toward long-run equilibrium following macroeconomic shocks. In the short run, government expenditure (-0.9) and broad money supply (-0.4) exert negative and statistically significant impacts on economic growth, highlighting structural challenges and efficiency bottlenecks in public spending and liquidity allocation. Diagnostic and stability tests (LM, Breusch-Pagan-Godfrey, Jarque-Bera, CUSUM, and CUSUMSQ) confirm that the estimated econometric model is robust, correctly specified, and structurally stable. The study recommends rationalizing public expenditure toward high-productivity capital investments, enhancing fiscal-monetary policy coordination, and accelerating structural diversification across non-hydrocarbon sectors.