Impact of Inflation Targeting Policy on Achieving Economic Growth Stability in Algeria

Abstract

This study focused on analyzing and mesuring the effects of inflation targeting policies on economic growth stabilization in Algeria from 2002 to 2022. As a novel approach to managing monetary policy to combat and minimize inflation, the research utilized the ARDL methodology. Findings suggest that Algeria implicitly embraced this policy between 2002 and 2010, transitioning to a semi-explicit adoption from 2010 to 2022. The analysis showed a significant long-term positive correlation between economic growth and inflation rates when they are below the target, with a slope of 2.38. Conversely, inflation rates exceeding the target negatively affected growth, with a slope of -1.70, while the broader monetary mass exhibited only a slight impact (slope of -0.07). The study underscores the effectiveness of inflation targeting in promoting sustained economic growth and recommends that the Bank of Algeria formally implement an inflation forecasting and targeting strategy to ensure long-term economic stability