## The Equilibrium Real Exchange Rate in a Commodity Exporting Country: Algeria’s Experience

_IMF Working Papers, July 1, 2005_

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## Bibliographic details
- Authors: Taline Koranchelian
- Published: July 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451861549.001

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### Summary findings
- Drawing on the existing literature, a long-run equilibrium real exchange rate path is estimated for Algeria.
- The Balassa-Samuelson effect together with real oil prices explain the long-run evolution of the equilibrium real exchange rate in Algeria.
- The half-life of the deviation of the real exchange rate from the estimated equilibrium level is about nine months, similar to that in other commodity-exporting countries.
- General conclusions:
  - (i) there is a time-varying long-run equilibrium exchange rate in Algeria as in other commodity-exporting countries; and
  - (ii) the real effective exchange rate of the Algerian dinar at end-2003 was broadly in line with this equilibrium.

### Methodology and analytical approach
- Estimation builds on existing literature (no additional methodological specifics provided on the page).
- Key explanatory factors identified: Balassa-Samuelson effect; real oil prices.

### Implications
- Evidence supports the presence of a time-varying long-run equilibrium real exchange rate in a commodity-exporting economy context.
- Real oil prices are a central determinant of equilibrium real exchange rate movements for Algeria, alongside structural productivity effects captured by the Balassa-Samuelson mechanism.
- The relatively short half-life (about nine months) of deviations suggests mean reversion of the real exchange rate toward equilibrium on a sub-annual timescale, comparable to other commodity exporters.

*IMF Working Papers — Taline Koranchelian, "The Equilibrium Real Exchange Rate in a Commodity Exporting Country: Algeria’s Experience", July 1, 2005.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-equilibrium-real-exchange-rate-in-a-commodity-exporting-country-algerias-experience-18318_