JSPES, Vol. 44, No. 1-2 (Spring-Summer 2019)
pp. 121-140

Impact of Oil Price Fluctuations on Inflation and the Exchange Rate of the Algerian Dinar, 1973-2016 

Dr. Cherakrak Samir
Dr. Gaham Wahiba
University of Skikda, Algeria
Dr. Sabah Abah Nouri Al-Mihyawi
Institute of Administration Rusafa
Middle Technical University
Baghdad, Iraq

This study will analyse and measure the effect of oil price fluctuations on inflation and the Algerian dinar exchange rate for the period 1973-2016, using the error correction model. We conclude that there is a short and long relation between the prices of oil, on the one hand, and the exchange rate and inflation rate, on the other. Inflation responds to fluctuations in oil prices directly in the short term, as any change in oil prices by 1% leads to a decrease in the rate of inflation directly during the first year by 0.0067%, but this effect becomes positive from the second year and continues this effect until the tenth year by 0.3196%. Any change in oil prices by 1% leads to a direct drop of 1.25% in the first year to reach 2.20% in the first year. A sudden change in oil prices by one standard deviation negatively affects the exchange rate in the short and long terms.