The Effectiveness of the Exchange Rate Channel in Transmitting the Impact of Monetary Policy on Economic Growth: The Case of Algeria for the Period 1991–2025, Using QARDL

Abstract

The study aims to evaluate the effectiveness of the exchange rate channel in transmitting the impact of monetary policy on economic growth in Algeria during the period 1991-2025, using the Quantile Autoregressive Distributed Lag (QARDL) model. It relies on quarterly data for key variables: exchange rate (tch), interest rate (ir), foreign reserves (cr), and broad money (m2). The results reveal clear nonlinear effects in the long run, where the tch coefficient is negative and insignificant in the lower quantile (0.25: -0.000021), indicating a weak impact on low growth; it becomes more negative in the median (0.50: -0.000497) and upper (0.75: -0.005430) quantiles, reflecting an exacerbation of economic deterioration under currency fluctuations. In the short run, however, it is weakly positive in 0.25 (0.000981) and increases in 0.50 (0.003245) and 0.75 (0.002827), suggesting short-term resilience. It is recommended to enhance monetary flexibility and develop financial markets to improve effectiveness.