The Impact of Volatile Oil Prices on the Indicators of Foreign Trade in Algeria during the Period (1990-2022)

Abstract

This study aims to highlight the impact of oil prices fluctuations on Algeria’s foreign trade indicators during the period 1990-2022 and how various factors interact with oil prices development and affect the Algerian economy. Two econometric models were employed to address the research problem; the former is the ARIMA-ARCH model, a standard predictive model for analyzing volatility and oil price fluctuations during the study period, the latter is the Vector Auto regression VAR (p) model, used to analyze the impact of oil price volatility shocks on the study variables. It was found that the model reflects the complex dynamics between trade flows, openness, exchange rates, and oil volatility in Algeria. Among the key findings are: Oil price volatility initially affects increasing economic openness by boosting trade flows but later leads to somewhat discouraged exports. There are substitution effects between exports and imports. Export growth tends to lead to currency appreciation over time. Trade openness can exert downward pressure on the currency value. Finally, stability in all variables implies that shocks can have long-lasting effects. These points highlight the intricate relationships between economic factors in Algeria and underscore the importance of understanding these relationships for sound policy and economic decision-making.