The Role Of Private Sector Credit In Explaining The Dynamics Of Inflation In Algeria during the Period 1990–2024

Abstract

This study aimed to assess the impact of the volume of credit directed to the private sector in the economy on the inflation rate in Algeria, based on annual data covering the period 1990–2024. To achieve this objective, the Autoregressive Distributed Lag model was employed to analyze the dynamic response of the inflation rate to changes in the volume of credit directed to the private sector (as a percentage of GDP).

The results revealed a positive and significant long-term effect of private sector credit on inflation, while in the short term, the study variables had no significant effect. These findings indicate that most credit is directed toward consumption rather than productive investment, reflecting the weak allocative efficiency of financial resources. The study recommended the need to redirect credit toward productive activities, regulate consumer credit, and enhance the flexibility of the productive system in the Algerian economy.