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Examining the Volatility of Oil Revenue and its Impact on Algeria’s Macroeconomic Stability

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  • Bouyacoub Brahim

    (University of Oran 2 Mohamed Ben Ahmed, Oran, Algeria)

Abstract

Research background Algeria heavily relies on its oil revenues, being one of the leading crude oil producers in Africa and a key member of OPEC. This dependency exposes its economy to the volatility of oil prices in international markets, which can have significant repercussions on its macroeconomic stability. Understanding these challenges and analyzing their impacts are essential for formulating appropriate public policies. Purpose The main objective of this study is to understand the impact of oil revenue volatility on Algeria’s macroeconomic stability from 1980 to 2023 and to formulate policy recommendations to mitigate the risks associated with this volatility. Research methodology We will examine the long-term implications of an oil revenue volatility analysis on Algeria’s macroeconomic stability using the ARDL modeling method. By understanding this correlation, we aim to propose recommendations to promote more stable and sustainable economic management for the country. Results The results have revealed significant long-term relationships between various variables, including oil prices, oil revenues, oil production, as well as fiscal and budgetary policies, particularly public expenditures. The findings suggest that higher oil prices have a negative impact on oil revenue volatility, indicating a trend towards revenue stabilization when prices increase. However, an increase in oil production is associated with an increase in revenue volatility. Additionally, stricter fiscal and budgetary policies seem to contribute to stabilizing oil revenues. These conclusions underscore Algeria’s strong dependence on oil revenues, with the hydrocarbon sector playing a central role in its economy. Novelty This study proposes an innovative approach to thoroughly examine the impact of oil revenue volatility on Algeria’s macroeconomic stability over the period 1980-2023, using the empirical ARDL model. These findings can provide valuable insights for policymakers and researchers who are interested in oil-dependent economies.

Suggested Citation

  • Bouyacoub Brahim, 2025. "Examining the Volatility of Oil Revenue and its Impact on Algeria’s Macroeconomic Stability," Folia Oeconomica Stetinensia, Sciendo, vol. 25(1), pages 73-94.
    • Handle: RePEc:vrs:foeste:v:25:y:2025:i:1:p:73-94:n:1004
    DOI: 10.2478/foli-2025-0004
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    More about this item

    Keywords

    Algeria; Oil revenue volatility; Macroeconomic stability; ARDL modeling method; oil production;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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