Nonlinear and Asymmetric Effects of Monetary Policy Shocks on Economic Growth in Algeria (1995–2022): Evidence from a NARDL Approach and Policy Implications for Monetary Transmission Efficiency

This study investigates the nonlinear and asymmetric effects of monetary policy shocks on Algeria's economic growth over the period 1995-2022 using the Nonlinear Autoregressive Distributed Lag (NARDL) model.The research aims to examine whether positive and negative changes in key monetary policy variables produce different short-run and longrun impacts on economic performance, thereby providing a deeper understanding of the effectiveness of monetary transmission mechanisms in a developing, resource-dependent economy.Annual time-series data were analyzed to capture both the short-term dynamics and long-term equilibrium relationships between economic growth and selected monetary indicators, including money supply and credit to the private sector.The NARDL framework allows for the decomposition of monetary shocks into positive and negative partial sums, enabling the assessment of asymmetric responses in economic growth.The empirical findings reveal that monetary variables do not exert statistically significant effects on economic growth in the short run, suggesting weak or delayed transmission mechanisms within the Algerian financial system.However, long-run results indicate that credit to the private sector negatively affects economic growth, reflecting structural inefficiencies in financial intermediation and potential misallocation of credit resources.The analysis further confirms the presence of asymmetric effects.Positive shocks to the money supply initially lead to a temporary decline in economic growth, followed by gradual improvement in the medium term.Conversely, negative monetary shocks generate a short-term increase in growth, which is later reversed, resulting in a long-term slowdown.These findings highlight the nonlinear nature of monetary transmission and the sensitivity of Algeria's economic performance to policy direction and structural conditions.The study concludes that the limited effectiveness of monetary policy in stimulating growth is largely attributable to structural constraints within the banking sector, weak financial depth, and insufficient coordination between monetary and fiscal policies.Accordingly, the paper recommends strengthening banking efficiency, improving credit allocation toward productive sectors, enhancing financial market development, and reinforcing policy coordination to increase the growth-enhancing role of monetary policy.This research contributes to the empirical literature on asymmetric monetary policy effects in developing economies and provides policy-relevant insights for improving macroeconomic stability and long-term economic performance in Algeria.