Energy Subsidies And Fiscal Resilience In Algeria

Abstract

This study examines the dynamic effects of energy subsidies and oil revenue shocks on Algeria’s fiscal performance and economic output over the period 2000–2023. A DSGE-BVAR model with Markov regime switching is employed to capture regime-dependent responses. The results indicate that subsidy shocks are contractionary in the short term, while oil shocks produce volatile and often adverse effects on output. In contrast, public expenditure and tax revenue show more stable and positive impacts. Forecast variance decomposition reveals persistent dependence on extractive revenues. These findings underscore the urgency of fiscal rebalancing and structural energy reform.