Determining the equilibrium level of the Algerian Dinar exchange rate using "BEER" method for the period 1980-2020

Abstract

This study aims to model the real exchange rate value in Algeria for the period (1980-2020) using the "BEER" methodology, specifically employing the Edwards model (1989-94) developed by Elbadawi (1994). This approach illustrates the real exchange rate value as a function of fundamental variables in both the medium and long terms. The estimated equilibrium value of the real exchange rate is derived by optimizing the fundamental variables under stationary conditions. The results reveal a lack of alignment between the observed real exchange rate and the equilibrium value of the exchange rate. Consequently, cases of imbalance in the real exchange rate emerge, which can be attributed to the trajectory of the Algerian Dinar exchange rate.