A Data Driven ARDL Analysis of Foreign Trade and Economic Growth under the Dutch Disease : The Case of Algeria

Abstract

This study investigates the impact of foreign trade on economic growth in Algeria over the period 1990–2023, employing the Autoregressive Distributed Lag (ARDL) methodology to analyze both long-run and short-run relationships. The analysis focuses on five key variables: economic growth, exports, imports, trade openness, oil prices, and import-restriction policies (introduced as a dummy variable), in addition to the exchange rate as an influential factor shaping trade performance. The findings indicate that exportsprimarily composed of hydrocarbonsare positively associated with economic growth; however, this reliance simultaneously heightens the fragility of the Algerian economy due to fluctuations in global oil prices. Imports were shown to influence growth in a manner that deviates from economic theory, reflecting the economy’s dependence on imported consumer goods and the weakness of domestic manufacturing industries. In contrast, trade openness exhibited a negative and statistically insignificant effect on growth, largely because it is dominated by imports in the absence of a strong domestic productive base. The results further reveal the limited effectiveness of import-restriction policies and currency depreciation in fostering economic growth. Overall, the study underscores the structural fragility of Algeria’s growth trajectory and its persistent dependence on hydrocarbon revenues. Achieving sustainable growth, therefore, requires genuine economic diversification and the development of a robust and competitive productive base.