Enhancing Monetary Policy Transmission in Algeria

Selected Issues Papers, October 3, 2025

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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.

Interest rate channel is relatively weak.
BA focuses on liquidity operations rather than interest rate tools.
Capacity in macroeconomic forecasting is being improved.
The new monetary and banking law provides operational and organizational tools to support modernization.

Shift focus toward interest rate tools to strengthen the interest rate channel.
Advance financial sector reform to support monetary policy transmission.
Enhance central bank independence to improve monetary policy effectiveness.
Continue building macroeconomic forecasting capacity to support policy decisions.

Asset and liability management
Central bank policy rate
Central Banks
Financial services
Liquidity
Liquidity management
Market interest rates
Open market operations
Keywords: Algeria; Central bank policy rate; Global; impediments of transmission; interest rate adjustment; interest rate channel; interest rate tool; interest rate tools; liquidity; Liquidity management; Market interest rates; market rate; monetary aggregates; monetary policy decision; monetary policy framework; monetary policy reaction function; monetary policy transmission; Open market operations; reaction function; Structural VAR

Source: Enhancing Monetary Policy Transmission in Algeria, Selected Issues Papers (2025), by Gian Plebani and William Gbohoui.