Oil Rents, Fiscal Dominance and Monetary Dynamics in Algeria: A Stock-Flow Consistent Approach

Oil Rents, Fiscal Dominance and Monetary Dynamics in Algeria: A Stock-Flow Consistent Approach | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Oil Rents, Fiscal Dominance and Monetary Dynamics in Algeria: A Stock-Flow Consistent Approach Sid Ahmed ZENAGUI This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8754872/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper presents a Stock-Flow Consistent (SFC) macroeconomic model that's specifically designed to reflect the unique institutional and structural features of the Algerian economy. It incorporates key elements like oil rents, government spending behaviors, money creation from within the system, and the financial relationships among the government, banks, the central bank, and the foreign sector. By using data from Algeria spanning from 1990 to 2025, the study explores how fluctuations in oil revenue influence fiscal dynamics, monetary policy, and the overall stability of the economy. The simulation results bring forth three main insights. Firstly, Algeria's economic growth continues to be heavily reliant on oil, with fiscal policy serving as the main link between global oil markets and local economic activity. Secondly, the economy seems to function under a long-standing situation of fiscal dominance, where monetary conditions are driven by the government's need for financing, rather than any independent monetary policy goals. Thirdly, shocks in oil prices affect fiscal balances, liquidity creation, and the external account all at once, leading to significant vulnerabilities in growth volatility, inflation, and reserve depletion. Looking at alternative scenarios, the findings indicate that cutting back on deficit monetization and encouraging economic diversification could greatly enhance overall stability, but these improvements come with notable trade-offs between maintaining monetary stability and managing public debt. In summary, this paper argues that Algeria's macroeconomic instability isn't just caused by external oil shocks; rather, it's a result of deeply rooted fiscal-monetary relationships within a growth model reliant on rents. The SFC framework sheds light on policy insights that traditional macroeconomic models often miss. Macroeconomics Oil rents Fiscal dominance Endogenous money Stock-Flow Consistent models Algerian economy Full Text Additional Declarations The authors declare no competing interests. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8754872","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":583731431,"identity":"c364735d-6b60-4c77-8caa-1ec89ee973de","order_by":0,"name":"Sid Ahmed ZENAGUI","email":"data:image/png;base64,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","orcid":"https://orcid.org/0009-0002-5333-5106","institution":"University of Ain Temouchent ALGERIA","correspondingAuthor":true,"prefix":"","firstName":"Sid","middleName":"Ahmed","lastName":"ZENAGUI","suffix":""}],"badges":[],"createdAt":"2026-02-01 08:48:07","currentVersionCode":1,"declarations":{"humanSubjects":false,"vertebrateSubjects":true,"conflictsOfInterestStatement":false,"humanSubjectEthicalGuidelines":false,"humanSubjectConsent":false,"humanSubjectClinicalTrial":false,"humanSubjectCaseReport":false,"vertebrateSubjectEthicalGuidelines":true},"doi":"10.21203/rs.3.rs-8754872/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8754872/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":101754829,"identity":"c7f03029-c9b5-4fdb-8046-1078dfcf5f2b","added_by":"auto","created_at":"2026-02-03 10:47:04","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":1703008,"visible":true,"origin":"","legend":"","description":"","filename":"OilRentsfinale.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8754872/v1_covered_3683071e-8b43-48d6-add0-55094f34fc75.pdf"}],"financialInterests":"The authors declare no competing interests.","formattedTitle":"\u003cp\u003e\u003cstrong\u003eOil Rents, Fiscal Dominance and Monetary Dynamics in Algeria:\u003c/strong\u003e\u003c/p\u003e\n\u003cp\u003eA Stock-Flow Consistent Approach\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Oil rents, Fiscal dominance, Endogenous money, Stock-Flow Consistent models, Algerian economy","lastPublishedDoi":"10.21203/rs.3.rs-8754872/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8754872/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper presents a Stock-Flow Consistent (SFC) macroeconomic model that's specifically designed to reflect the unique institutional and structural features of the Algerian economy. It incorporates key elements like oil rents, government spending behaviors, money creation from within the system, and the financial relationships among the government, banks, the central bank, and the foreign sector. By using data from Algeria spanning from 1990 to 2025, the study explores how fluctuations in oil revenue influence fiscal dynamics, monetary policy, and the overall stability of the economy.\u003c/p\u003e \u003cp\u003eThe simulation results bring forth three main insights. Firstly, Algeria's economic growth continues to be heavily reliant on oil, with fiscal policy serving as the main link between global oil markets and local economic activity. Secondly, the economy seems to function under a long-standing situation of fiscal dominance, where monetary conditions are driven by the government's need for financing, rather than any independent monetary policy goals. 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