Short and long term determinants of export diversification in Algeria: ARDL model (1995-2020)

Abstract

The object of this paper is to examine the determinants of the diversification of exports in Algeria  over the period 1995-2020 using the  ARDL model. The cointegration analysis revealed the  presence of long-run relationship between export diversification and its  determinants. The error  correction model also revealed a short-run relationship among export and its determinants. The  study found  that all the explanatory variables had a long- run relationship with export  diversification. Specifically, terms of trade had the expected  negative sign. On the other hand, GDP  growth and degree of freedom to invest found to affect, in long-term, negatively export  diversification in Algeria. The short-term results showed that the positive drivers of export  diversification are GDP growth and degree of  freedom to invest. While terms of trade favours export specialization. These results suggest a diversification in the export basket,  structural  transformation of the Algerian economy and improvement of the business climate.