Oil Price and Dutch Disease: The Case of Algeria

This study examines the effect of recent increases of oil price on the key macroeconomic variables of Algeria. We have used the vectoriels auto-regressifs model with linear and non-linear specifications to analyze the data over the period 1995Q1-2007Q3. The findings indicate that the increase in the inflation rate due to oil price shock is the main cause of the real exchange rate's appreciation in the short term. This real appreciation involves a spending effect which could be at the origin of the Dutch Disease.