Money, inflation and causality in a financially repressed economy: Algeria, 1970—88

Abstract

The objective of the paper is to replicate tests identifying the line of causality between the money supply and the rate of inflation using Algerian date for the period 1970–88, and provide new evidence for a developing economy. The methodology adopted is that of Granger and the results show that there is a very strong relationship between the money supply and the rate of inflation with the line of causation being unidirectional, that is, from the money supply to inflation with no feedback effects.