The use of the joint simultaneous integration methodology to measure the impact of certain macroeconomic variables on the GDP: ARDL model
DOI:
https://doi.org/10.51599/is.2024.08.02.04Keywords:
gross domestic product, public expenditures, imports, exports, ARDL model.Abstract
Purpose. The objective of this study is to analyse the evolution of public expenditure, exports, imports, and gross domestic product (GDP) in Algeria over the past four decades (1980–2022). It aims to measure the impact of each of these macroeconomic variables (public expenditure, imports, and exports) on GDP during the study period, in the long and short term. Additionally, the study intends to identify the most significant economic variables influencing GDP in Algeria by constructing an econometric model (autoregressive model) based on economic theory and previous studies. These variables are considered the driving force and effective activator for improving GDP.
Results. The findings obtained using the ARDL bounds testing approach for cointegrated time series revealed the existence of a long-run equilibrium relationship between the independent variables (public expenditure, imports, exports) and the dependent variable (GDP). In the short run, most of the model variables were statistically significant, indicating their influence in explaining GDP. This allows us to conclude that there is a dynamic relationship between the model variables in Algeria during the study period. Additionally, the error correction coefficient was statistically significant at the 5 % level, while the speed of adjustment to equilibrium was 0.8828.
Scientific novelty. Research in this field continues to provide new insights into the dynamic relationship between these important economic factors. While this topic has been explored in previous studies, our research distinguishes itself by examining the collective impact of public expenditure, imports, and exports on GDP. This study establishes a direct link between these variables and GDP. Modern studies emphasise the significance of the composition of public expenditure in determining its impact on GDP. Additionally, several studies have demonstrated the influence of exports and imports on GDP. Imports play a crucial role in enhancing production efficiency and reducing costs within the economy. The current study addresses the gap in previous research by simultaneously examining public expenditure, imports, and exports as independent variables, considering both the pre- and post-Algerian economic reforms period.
Practical value. This study contributes to understanding economic growth trajectories and how various economic components impact GDP. By analysing the influence of public expenditure, exports, and imports on economic growth, the study offers significant added value. It empowers policymakers at the macroeconomic level to leverage these findings in formulating and implementing effective economic policies that can enhance GDP, thereby promoting economic growth and improving living standards through the management of the study variables such as public expenditure, export values, and imports.
References
Abdelkader, R., & Mohammed, R. (2017). The role of fiscal policy in achieving overall Algerian economic stability during the period: 2001–2016 (Arabic version). Strategy and Development Review, 7(12), 162–186. Available at: https://www.asjp.cerist.dz/en/article/18646.
Abel, J. R., & Gabe, T. M. (2011). Human capital and economic activity in urban America. Regional Studies, 45(8), 1079–1090. https://doi.org/10.1080/00343401003713431.
Akacem, K. (2004). Economic reforms in Algeria: an overview and assessment. The Journal of North African Studies, 9(2), 115–125. https://doi.org/10.1080/1362938042000323383.
Al-Alusi, H. M., & Al-Satouri, K. K. S. (2023). Public spending and the extent of its contribution to economic development in Iraq. Journal of Anbar University for Economic and Administrative Sciences, 15(3), 1–24. Available at: https://www.iasj.net/iasj/download/d44e9708b856f27f.
Azzazi, F., & Brakni, S. (2019). The impact of financial development indicators on real GDP in Algeria: a standard study during the period 1990–2017. El-Bahith Review, 19(1), 591–602. Available at: https://www.asjp.cerist.dz/en/article/105115.
Bătuşaru, C. M., Baboş, A., & Pîrvuţ, V. (2023). Tracking economic growth: a correlation analyse on the determinants of gross domestic product. International Conference “Knowledge-Based Organization”, 29(2), 24–29. https://doi.org/10.2478/kbo-2023-0031.
Bouchareb, N., & Morad, I. (2023). Contribution of the Algerian water management strategy to the agricultural sector of Setif province. Journal of Innovations and Sustainability, 7(2), 08. https://doi.org/10.51599/is.2023.07.02.08.
Boulafi, M., & Yemani, L. (2013). Government expenditure tool in Algeria’s financial policy 1992–2011. Strategy and Development Review, 3(5), 187–210. Available at: https://www.asjp.cerist.dz/en/article/7521.
Boularedj, S., & Faouzi, Т. (2015). Measuring the impact of the financial development on the economic growth in Algeria. European Scientific Journal, 11(16), 413–426. Available at: https://core.ac.uk/reader/236409765.
Boulila, H., & Benbouziane, M. (2018). Austerity in time of crisis: a solution or a dangerous idea? Evidence from Algeria. Etikonomi, 17(1), 11–24. https://doi.org/10.15408/etk.v17i1.6799.
Central Bank of Algeria (2007). Annual report “Rapport 2006 evolution economique et monetaire en Algerie”. Available at: https://www.bank-of-algeria.dz/wp-content/uploads/2023/01/rapport-annuel-2006-fr.pdf.
Central Bank of Algeria (2011). Annual report “Rapport 2010 evolution economique et monetaire en Algerie”. Available at: https://www.bank-of-algeria.dz/wp-content/uploads/2023/01/rapport-annuel-2010-fr.pdf.
Central Bank of Algeria (2016). Annual report “Rapport 2015 evolution economique et monetaire en Algerie”. Available at: https://www.bank-of-algeria.dz/wp-content/uploads/2022/05/Rapport-Annuel-BA-2015.pdf.
Central Bank of Algeria (2017). Annual report “Rapport annuel 2016 evolution economique et monetaire en Algerie”. Available at: https://www.bank-of-algeria.dz/wp-content/uploads/2022/05/Rapport-Annuel-BA-2016.pdf.
Central Bank of Algeria (2019). Annual report “Rapport annuel 2018 evolution economique et monetaire en Algerie”. Available at: https://www.bank-of-algeria.dz/wp-content/uploads/2023/02/rapport-ba-2018fr.pdf.
Central Bank of Algeria (2022). Annual report “Rapport annuel 2021 evolution economique et monetaire en Algerie”. Available at: https://www.bank-of-algeria.dz/wp-content/uploads/2023/02/rapport-ba-2021fr-1.pdf.
Central Bank of Algeria (2023). Annual report “Rapport annuel 2022 evolution economique et monetaire.” Available at: https://www.bank-of-algeria.dz/wp-content/uploads/2023/11/Rapport-BA-2022-Fr.pdf.
Chemingui, M. A., & Ayad, N. (2003). Understanding the poor human capital contribution to economic growth in Algeria. Available at: https://old.adapt.it/adapt-indice-a-z/wp-content/uploads/2014/04/chemingui_ayadi_understanding_algeria_human_capital_final_2003.pdf.
Powell, D. J. (Ed.) (2013). Gross Domestic Product. In the Trader’s Guide to The Euro Area (pp. 5–25). Wiley. https://doi.org/10.1002/9781118744369.ch2.
Deubel, P., Montoussé, M., & Agostino, S. (2008). Dictionnaire de sciences économiques et sociales. Bréal. Available at: https://books.google.dz/books?id=Vf0Arl7iStUC.
Eregha, P. B., & Mesagan, E. P. (2020). Oil resources, deficit financing and per capita GDP growth in selected oil-rich African nations: a dynamic heterogeneous panel approach. Resources Policy, 66, 101615. https://doi.org/10.1016/j.resourpol.2020.101615.
Ertekin, Ş., & Bulut, Ş. (2021). The relation of public expenditures with economic growth in OECD countries. Yönetim ve Ekonomi Dergisi, 28(1), 187–203. https://doi.org/10.18657/yonveek.838461.
Aldawood, F. A. A., Dandi, A. F., & Loughani, J. E. A. (2022). Annual statistical report 2022. Available at: https://oapecorg.org/Home/Publications/Reports/Annual-Statistical-report.
Mallett, J., & Keen, C. (2012). Does GDP measure growth in the economy or simply growth in the money supply? ArXiv: General Finance. https://www.researchgate.net/publication/230608947.
Hoover, K. D. (2011). Understanding Gross Domestic Product. In Applied Intermediate Macroeconomics (pp. 71–113). Cambridge University Press. https://doi.org/10.1017/CBO9781139023825.007.
Al-Wazani, K. W., & Al-Rifai, A. H. (2005). Principles of macroeconomics: between theory and application, 7th ed. Dar Wael for Printing, Publishing, and Distribution.
Madani, A., Boutebal, S. E., Benhamida, H., & Bryant, C. R. (2020). The impact of Covid-19 outbreak on the tourism needs of the algerian population. Sustainability, 12(21), 8856. https://doi.org/10.3390/su12218856.
McConnell, M. M., Mosser, P C., & Quiros, G. P. (1999). A decomposition of the increased stability of GDP growth. Current Issues in Economics and Finance, 5(13), 1–12. Available at: https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci5-13.pdf.
Melikaoui, M. (2019). The relationship between government expenditure and gross domestic product in Algeria. Test study for Wagner’s law and keynesian hypothesis during the period 1991–2015. Journal of North African Economies, 15(2), 607–623. Available at: https://www.asjp.cerist.dz/en/article/101799.
Nahler, G. (2009). Gross Domestic Product (GDP). In Dictionary of Pharmaceutical Medicine (pp. 83–83). Springer Vienna. https://doi.org/10.1007/978-3-211-89836-9_621.
Nizar Saad Al-Din Al-Eissa (2001). Principles of macroeconomics: how the economy works in theory and application. Dar Al-Ilm and Culture for Printing and Distribution. https://www.noor-book.com/book/review/588285.
ONS (2017). Repport No. 194/2015 “Evolution des Echanges Extérieurs de Marchandises de 2004–2014.” Algiers. Available at: https://www.ons.dz/IMG/pdf/echangext04-14-2.pdf.
OPEC (2024). OPEC Basket Price. Available at: https://www.opec.org/opec_web/en/data_graphs/40.htm.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616.
Popkova, E. G., Bogoviz, A. V., Pozdnyakova, U. A., & Przhedetskaya, N. V. (2018). Specifics of economic growth of developing countries. In D. Endovitsky, E. Popkova (Eds.), Management of Changes in Socio-Economic Systems. Studies in Systems, Decision and Control, vol. 135. Springer, Cham. https://doi.org/10.1007/978-3-319-72613-7_12.
Seccareccia, M. (2011). The role of public investment as principal macroeconomic tool to promote long-term growth. International Journal of Political Economy, 40(4), 62–82. https://doi.org/10.2753/IJP0891-1916400403.
Shaqbaqab, I., & Ben Ziane, R. (2017). The impact of imported inflation on domestic inflation and foreign trade in Algeria. Recherches, 11(2), 90–105. Available at: https://www.asjp.cerist.dz/en/article/26629.
Seddiki, S., & Kiheli, A. S. (2019). Oil price shocks and Algerian economy: evidence from the new economic model. Roa Iktissadia, 9(3), 13–26. https://doi.org/10.37137/1416-009-001-001.
Topcu, E., Altinoz, B., & Aslan, A. (2020). Global evidence from the link between economic growth, natural resources, energy consumption, and gross capital formation. Resources Policy, 66, 101622. https://doi.org/10.1016/j.resourpol.2020.101622.
Wang, K., Liu, Z., Wei, Z., Lou, S., Hicham, A., Aissa, D., & Meo, M. S. (2022). How does Algerian trade respond to shocks in oil prices and uncertainty? Frontiers in Environmental Science, 10, 2022. https://doi.org/10.3389/fenvs.2022.944209.
