Implications Of The Global Financial Crisis ‎ On The Algerian Economy

Résumé: The global financial crisis may affect the Algerian economy through the following ‎channels: (1) increase of costs of firms’ borrowing to finance their investment, (2) ‎decline in oil prices, and (3) the lower world interest rates. This paper uses a small-‎open economy model with financial frictions (the financial accelerator) to ‎examine the implications of the global financial crisis on the Algerian economy ‎and evaluates the importance of the main transmission channels. Firms operating ‎in Algeria borrow from domestic and foreign banks. The financing costs depend ‎on firms’ balance sheet positions and on external finance premiums charged by ‎banks for higher risks they are facing. Main findings are that the global financial ‎crisis has substantially and negatively affected the Algerian economy and all ‎channels are important in the transmission of the financial shocks. Nevertheless, ‎the implementation of expansionary monetary and government spending policies ‎can successfully help the economy avoid recession and thus offset the negative ‎implications of the global financial crisis. ‎

Publié dans la revue: مجلة اقتصاديات شمال افريقيا