Economic Influences on the Velocity of Money in Algeria: A FMOLS Approach (1980-2023)

Abstract

This study examines the factors influencing the velocity of money in Algeria from 1980 to 2023. We aim to measure the impact of various economic variables on money velocity using the Fully Modified Ordinary Least Squares (FMOLS) method. Our findings reveal an inverse relationship between the velocity of money and factors such as inflation, the ratio of loans to the private sector to GDP, per capita GDP, and the exchange rate. Specifically, inflation did not have a significant impact, while the ratio of loans to the private sectorto GDP, the exchange rate, and per capita GDP were significant at the 5% level. Conversely, there is a positive and significant relationship between the interest rate and money velocity.