The Dynamic Impact of Real Exchange Rate Movements on Domestic Savings in Algeria: An Econometric Investigation Using the ARDL Approach (1980–2023)

The interaction between the real exchange rate and domestic savings constitutes a critical nexus in the formulation of macroeconomic policy, particularly for emerging economies that rely heavily on external financing and exhibit structural vulnerabilities.This study empirically investigates the long-and short-run effects of real exchange rate fluctuations on domestic savings in Algeria over the period 1980-2023.Employing the Autoregressive Distributed Lag (ARDL) bounds testing approach, the analysis aims to uncover both the dynamic causal relationship and the degree of responsiveness of domestic savings to exchange rate volatility, while controlling for other macroeconomic determinants such as GDP per capita, trade balance, and money supply (M2).The econometric results confirm the existence of a statistically significant and stable longrun equilibrium relationship between the real exchange rate and domestic savings.Specifically, real exchange rate depreciation is found to exert a positive and sustained effect on domestic savings in the Algerian economy.This relationship is explained by improved export competitiveness, higher returns in tradable sectors, and increased profitability of productive enterprises, which together stimulate household and institutional savings behavior.In contrast, real appreciation reduces export earnings and discourages saving in favor of consumption.In addition, the findings reveal that GDP per capita and trade balance improvements positively influence domestic savings, while money supply expansion has a long-term negative effect, mainly through inflationary channels and higher marginal propensity to consume.The short-run dynamics, captured through the ARDL error-correction model, indicate partial adjustment of savings to exchange rate shocks, with the speed of convergence estimated at approximately 42% per annum.The study concludes that macroeconomic stability in Algeria requires a prudent and predictable exchange rate policy aligned with coherent fiscal and monetary frameworks.Policymakers are advised to adopt a managed floating exchange regime that sustains competitiveness while preventing excessive volatility.Strengthening the coordination between exchange rate management, inflation control, and financial market deepening is essential for ,