Measuring and Analyzing the Effects of Money Supply Shocks on Economic Growth in Algeria (1996–2025): An Empirical Study Using the NARDL Model.

Abstract

This study aims to analyze the effects of money supply shock on economic growth in Algeria over the period 1996–2025, using the Nonlinear Autoregressive Distributed Lag (NARDL) model. The main findings reveal that there is a long-run relationship between economic growth and both positive and negative money supply shocks. The results also show that a positive money supply shock has a positive and statistically significant effect on economic growth in the long run, whereby a 1% increase in the money supply leads to an approximately 0.45% increase in the economic growth rate. In contrast, negative money supply shocks have a positive but statistically insignificant effect. Furthermore, the results indicate the presence of asymmetry in the effect of money supply shocks on economic growth. The study recommends improving the performance of the financial system and enhancing the efficiency of the banking sector to ensure the optimal allocation of credit toward productive sectors. It also recommends strengthening coordination between monetary and fiscal policies and diversifying economic resources to enhance the resilience of the Algerian economy and support sustainable economic growth.