Inflation Dynamics in Algeria
Abstract
In thispaper, we analyze Inflation Dynamics in Algeria between 2002 and 2016. We use a Vector Auto Regressive model (VAR), impulse response functions (IRF) and variance error decomposition (VDC) to uncover possible links between public spending component sand inflation. Wetest for the sources and dynamics of inflation in Algeria by focusing on public spending, since they are expected to exert a strong influence on the aggregate demand and hence inflation. According to the results we found, inflation in Algeria is persistent; shocks are lasting longer and having impact on the future inflation path. Social transfers and equipment spending are found to be the most contributing components of public spending in explaining inflation in Algeria.
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88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 Constant 0.004564 0.003494 0.002676 0.003505 0.002702 0.001668 0.001691 Std error 2,23 0.002394 0.002378 0.002661 0.002415 0.002689 0.002659 0.002689 Pval 0.0625 0.1481 0.3197 0.1531 0.3200 0.5334 0.5326
Lagged Dependant
0.803201 0.859913 0.814509 0.814475 0.844053 0.794525 0.852288 0.793749 0.853947 0.807033 0.808275 0.743379 0.724596 0.790559 0.724715 0.791902 0.771576 0.772582
Std error 0.077689 0.074074 0.073108 0.075464 0.079191 0.078559 0.075339 0.079713 0.076451 0.076539 0.077755 0.093526 0.091082 0.097187 0.092063 0.098268 0.095532 0.096674 Pval 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Trend 9.41E-05 6.70E-05 7.63E-05 7.63E-05 0.000123 0.000133 8.39E-05 0.000130 8.93E-05 9.58E-05 9.93E-05 1.19E-05 4.26E-05 2.61E-05 4.35E-05 3.18E-05 5.89E-05 6.27E-05 Std error 4.68E-05 4.72E-05 4.56E-05 4.61E-05 7.83E-05 6.99E-05 7.22E-05 7.55E-05 7.70E-05 7.04E-05 7.50E-05 9.60E-05 9.24E-05 9.23E-05 9.55E-05 9.59E-05 9.20E-05 9.53E-05 Pval 0.0496 0.1624 0.1007 0.1043 0.1224 0.0635 0.2507 0.0915 0.2518 0.1798 0.1913 0.9018 0.6466 0.7788 0.6507 0.7416 0.5250 0.5140
Dummy -0.001817 -0.001879 -0.000828 -0.001758 -0.001074 -0.000941 -0.001106 0.000811 0.000296 0.000575 0.000250 0.000299 -5.94E-05 -0.000245 Std error 0.002999 0.002611 0.002654 0.002891 0.002909 0.002578 0.002826 0.003231 0.002975 0.002998 0.003176 0.003214 0.002950 0.003157 Pval 0.5474 0.4751 0.7564 0.5459 0.7137 0.7165 0.6972 0.8030 0.9212 0.8488 0.9375 0.9263 0.9840 0.9384
Wage Bill 0.010947 -0.002301 6.21E-05 0.001762 0.003177 -0.006814 -0.004585 -0.003866 -0.001379 -0.008033 -0.005501 Std error 0.028257 0.028673 0.027878 0.032332 0.031174 0.031402 0.030525 0.031651 0.030987 0.031423 0.030753 Pval 0.7001 0.9364 0.9982 0.9568 0.9193 0.8291 0.8812 0.9033 0.9647 0.7993 0.8588
Transfers 0.040030 0.035315 0.035317 0.039889 0.039928 0.035457 0.035358 0.033383 0.033346 0.033089 0.032938 Std error 0.018098 0.017488 0.017682 0.018029 0.018214 0.017646 0.017837 0.018365 0.018574 0.018153 0.018358 Pval 0.0316 0.0488 0.0514 0.0315 0.0331 0.0500 0.0532 0.0752 0.0789 0.0746 0.0792
Equipment Spending
0.034146 0.030367 0.030361 0.033083 0.033493 0.029397 0.029684 0.024841 0.025243 0.024506 0.024782
Std error 0.014999 0.014283 0.014692 0.014970 0.015233 0.014651 0.014921 0.017067 0.017304 0.016677 0.016919 Pval 0.0271 0.0385 0.0441 0.0317 0.0326 0.0503 0.0524 0.1519 0.1511 0.1483 0.1496
R-squared 0.603458 0.605547 0.635245 0.635245 0.567831 0.606346 0.606262 0.606429 0.606640 0.636235 0.636406 0.597663 0.622964 0.614219 0.622979 0.614743 0.639193 0.639439 Observations 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 AIC -7.359544 -7.364826 -7.443101 -7.406064 -7.273510 -7.366853 -7.366641 -7.330028 -7.330564 -7.408782 -7.372215 -7.307999 -7.372948 -7.350018 -7.335952 -7.314342 -7.379910 -7.343553 SC -7.212211 -7.217493 -7.295769 -7.221899 -7.126178 -7.219521 -7.219309 -7.145863 -7.146399 -7.224617 -7.151216 -7.123833 -7.188783 -7.165853 -7.114954 -7.093344 -7.158911 -7.085722
Overall Inflation
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