Determinants of Demand for Algerian Products Outside the Hydrocarbon Sector During the Period 2000-2022

Abstract

     This study aims to identify the primary determinants of demand for Algerian products outside the hydrocarbon sector in international markets between 2000-2022. This is achieved through a quantitative analysis of annual data, elucidating the directional relationships between various variables by formulating them into mathematical models. Through performing all tests concerning the nature of the relationship existing between the variables, and employing the Johanson cointegration test, the study concludes that there are three cointegrating vectors. This implies a long-term equilibrium relationship between Algeria's non-hydrocarbon exports and their determinants, permitting the use of the Vector Error Correction Model (VECM). Upon estimating the VECM, it was found that the error correction coefficient, representing the strength of returning to the long-term equilibrium, is statistically significant and negative, estimated at (-0.3932). This means that when the variable of non-hydrocarbon exports in Algeria deviates from its equilibrium value in period (t-1), it gets adjusted by 39.32% of this deviation in period (t). This adjustment span is approximately two and a half years, reflecting the sluggishness in returning to the equilibrium in the long run.