Short and long-run response of economic growth to oil prices in Algeria: a combined cointegration approach

Oil prices had experienced sharp fluctuations during the last decades. A vast literature has been devoted to analyzing the macroeconomic effects of oil prices. This paper aims to contribute to this research field, by examining the impact of oil prices on economic growth in Algeria, for the period 1976–2019. The novelty of the study is that it employs the combined cointegration technique, to test the presence of long-run relationship between oil prices and economic growth. The empirical analysis revealed that there was long-run cointegrating relationship between the two variables. Moreover, the different estimators indicated that oil prices positively impacted the economic growth in the long-run while the error correction model supports the presence of negative and limited short-run effects, that disappeared after about one year and a half from the occurrence of the oil shock.