The asymmetric effects of oil price shocks on economic activities in Algeria: An empirical analysis

Abstract

This article analyses the impact of oil price shocks on economic growth, unemployment, government revenue and government expenditure in Algeria using a Structural Vector Autoregressive methodology for the period 1970-2017.We use contemporaneous restriction and new technique to identify structural oil price shocks in Algeria. The estimation results show that the positive oil price shock are found to have relatively small (though positive) effect on economic growth. Dutch disease prevents the expected positive effects of positive oil shocks. In order to avoid the harmful effects of oil price fluctuations decision makers have to diversify economy and unlink government expenditure from oil revenues.