Analyzing the Dynamic Relationship between Money Supply (M2), Nominal Interest Rate, and Economic Growth in Algeria: An Empirical Investigation Using the ARDL Approach (2000–2024)

This study investigates the long-term and short-term dynamics between money supply (M2), nominal interest rates, and economic growth in Algeria over the period 2000-2024.Given the critical role of financial market variables in shaping macroeconomic performance, this research examines how monetary aggregates and interest rates contribute to stimulating or constraining Algeria's economic trajectory.Employing advanced econometric techniques, including Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests, the ARDL bounds testing approach for cointegration, and autoregressive distributed lag (ARDL) estimation, the study provides robust empirical evidence of the interconnectedness of monetary policy and growth.The results reveal a significant long-run equilibrium relationship among the variables, indicating that an expansion in M2 supply positively influences Algeria's real GDP, while the nominal interest rate exhibits a mixed effect-stimulating growth in the short run but imposing constraints in the long run.These findings underscore the dual role of monetary policy: while liquidity expansion supports economic activities, the interest rate mechanism requires cautious calibration to avoid inflationary pressures.The study contributes to the literature on monetary economics in developing economies, highlighting Algeria's unique financial landscape and offering policy implications for sustainable growth strategies.