Exploring the Link Between Daily Exchange Rates and Quarterly Balance of Payments in Algeria

Abstract

This research paper examines the impact of exchange rate fluctuations on the Algerian balance of payments, identifying it as a primary influencing variable. To achieve the study's objectives and address the main research question, the analysis incorporates a review of applied literature that explores the relationship between these two variables. Furthermore, this study analyzes various previous works on the subject, employing the mixed time series model MIDAS PDL ALMON over the period 2000 to 2023. The findings reveal a direct quarterly impact of exchange rate changes on the balance of payments, with 69% of the total effects attributed to fluctuations in the daily exchange rate. For an optimal effect, the study suggests a 5-day lag in daily exchange rate data to achieve consistency.