The Impact of Economic Diversification on Economic Growth in Algeria During the Period 1990-2022.Using the Autoregressive Distributed Lag (ARDL) Model

Abstract

Purpose:This study aims to measure the impact of economic diversification on economic growth in Algeria during the period 1990–2022, while highlighting the importance of adopting an effective diversification strategy to achieve higher and more sustainable levels of economic growth, particularly in light of the heavy reliance on oil revenues and the volatility of oil prices in global markets.

Results:The findings reveal the existence of a long-run relationship between economic diversification and economic growth over the study period. However, this relationship remains relatively weak due to the continued dependence of the Algerian economy on the hydrocarbon sector as the main source of income. The results also emphasize the necessity of activating other economic sectors and enhancing integration among them to increase their contribution to Gross Domestic Product (GDP).

Scientific novelty:The scientific novelty of this study lies in the application of the Autoregressive Distributed Lag (ARDL) model to examine both the short-run and long-run relationships between economic diversification and economic growth in Algeria over a relatively long time span (1990–2022), thereby providing more accurate insights into the nature of this relationship within the Algerian economy.

Practical value:The practical value of this study is reflected in providing actionable insights for economic policymakers in Algeria regarding the importance of accelerating the implementation of economic diversification policies, developing non-oil sectors, and reducing dependence on hydrocarbons in order to achieve sustainable economic growth and long-term economic stability.