Oil price volatility and economic growth in Algeria

Algeria is one of the oil-rich countries that may be affected by the so-called natural resource curse. Algeria is one of the most important producers and exporters of hydrocarbon products (oil and gas) in the world; its exports from this sector represent about 98% of its total exportation. The hydrocarbon sector represents about 40-45% of the total GDP. The country's macroeconomic performance over the past decade has been solid because of the relatively high oil prices, combined with prudent macroeconomic policies. This study tries to test the impact of oil prices volatility on economic growth in Algeria applying a VAR model using annual data over the period 1970-2012. This study's results indicate that the negative growth effects of oil price volatility offset the positive impact of oil boom; therefore, it is argued that oil price volatility, rather than abundance per se, drives the resource curse paradox in Algeria.