Selected Issues Papers

Algeria is actively pursuing reforms to modernize its monetary policy framework, with a focus on enhancing the role of interest rates in achieving price stability. The new monetary and banking law provides the necessary operational and organization tools while the authorities are improving the capacity in macroeconomic forecasting. This paper analyses the monetary policy transmission in Algeria. The results suggest that the interest rate channel is relatively weak as the BA focuses on liquidity operations. A focus on interest rate tools, financial sector reform and central bank independence would help to improve monetary policy transmission in Algeria.