Algerian Dinar Exchange Rate, Between the PPP and the Random Walk Process hypotheses
An Econometric Study of the Period 1980-2017
Abstract
This study aims to investigate the Algerian dinar’s exchange rate tendency to the PPP hypothesis or to a random walk process, using monthly data going from January 1980 up to December 2017. Based on first and second-generation unit root tests, alongside unit root tests with gradual and discrete structural breaks (Innovation Outlier, Additive Outlier). The results of this study show that Algerian dinar’s exchange rate exhibits a long-run relation with the PPP’s proposition under the gradual structural break case. Contrarily, no relation in the cases of the discrete structural break or using the first and second-generation unit root tests.
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References
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