Dynamic analysis of the effect of the integration between fiscal and monetary policies in enhancing economic stability in Algeria during the period 1990–2024.

Abstract

The objective of this study is to analyze the dynamic relationship between the integration of fiscal and monetary policies in achieving economic stability in Algeria over the period from 1990 to 2024. This is done with a focus on how fiscal and monetary policy instruments interact to achieve economic stability, through the construction of an econometric model that illustrates the nature of this relationship. Using the Autoregressive Distributed Lag (ARDL) model, the results reveal a positive and statistically significant relationship between fiscal and monetary policy indicators and the level of economic stability in Algeria.

The findings show that an increase in government expenditure by one unit contributes to an improvement in the economic stability index by 1.075170 units, while an increase in monetary policy indicators, represented by the legal reserve ratio, contributes to an increase in economic stability by 4.271838 units.

Accordingly, these results indicate that coordination between fiscal and monetary policy has a positive and direct impact on enhancing economic stability, which reflects the importance of integrating economic policies to achieve sustainable growth and reduce economic fluctuations in Algeria.