Abstract

This study examined the relationship between oil price changes and inflation rate in Algeria from 1970–2014. The study method was able to capture asymmetries in the relationship between oil price and inflation, known as nonlinear autoregressive distributed lags (NARDL). The estimated model revealed the existence of a nonlinear effect of oil price on inflation. Specifically, we found a significant relation between oil price increases and inflation rate; whereas, a significant relation between oil price reduction and inflation was absent.

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