les cahiers du cread

Log in or Register to get access to full text downloads.

Remember me or Register

Fear of floating and exchange rate pass through to inflation in Algeria

Lynda Mizi Allaoua, Mohammed Achouche


The purpose of this paper is twofold: (i) identify a "fear of floating" theory in Algeria using indicators defined in empirical studies of Calvo and Reinhart (2002) and Hausmann et al (2000) and (ii) examine empirically one of its explanations; a strength pass-through of devaluation on domestic prices. For results, US/DZ exchange rates and foreign reserves variability probabilities, on monthly data over 1990-2015 period, classify Algeria among fear of floating countries. The VAR model based on Mc Carty (2007), over quarterly data of 2000-2016 period, shows that a three stage of inflation; import, producer and consumer prices react at US/DZ and do not at EU/DZ exchange rate.

Keywords: Exchange rate regime, inflation, pass-through, monetary policy, VAR model

AJOL African Journals Online