Algeria and the natural resource curse: oil abundance and economic growth

Abstract

In this paper, we examine the interaction between oil exports’ revenues and long-run economic growth in Algeria over the period 1979–2013. Advanced econometric procedures including the cointegration VARX (VAR with exogenous variables) model, over-identifying restrictions, bootstrapping, persistent profiles and Generalized Impulse Response Function are utilized in the empirical analysis. The results show a strong and positive association between oil revenue and long-run economic growth, but negative linkages between the volatility of oil revenues and growth in Algeria. Our impulse response analysis also provides evidence that a positive shock in oil revenues increases the level of real output, and appreciates the real exchange rate.

Keywords:

• resource curse
• oil revenues
• oil revenues volatility
• economic growth
• cointegrated vector autoregression (VARX*)
• Algeria

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. For further information, see: http://www.eia.doe.gov.

2. Algeria’s major trading partner includes the 17 Euro area countries, United States, and China.