Page 44 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.82, # 2, 2025, pp. 32-60

on reducing unemployment, which is economically plausible in the Algerian context
where sustained economic activity can rapidly influence demand for labor.

Table 5: Estimated matrices
Coefficient Std. Error z-Statistic Prob.
C(1) -0.085 0.211 -0.401 0.689
C(2) -27.031 22.935 -1.179 0.239
C(3) 28.289 14.344 1.972 0.049
C(4) -0.619 22.601 -0.027 0.978
C(5) -9.694 13.727 -0.706 0.480
C(6) -0.023 0.127 -0.179 0.858
C(7) 0.019 0.003 6.782 0.000
C(8) 0.019 0.003 6.782 0.000
C(9) 2.068 0.305 6.782 0.000
C(10) 1.256 0.185 6.782 0.000
Source: By author
On the other hand, the coefficients of matrix B, representing the direct impact of
structural shocks on the reduced residuals, are all highly significant (p < 0.001). This
means that the structural shocks identified in the model (linked to each variable) are
well differentiated and significantly explain the dynamics of the variables. More
specifically, the coefficients C(7) to C(10) indicate the magnitude of the immediate
impacts of the shocks specific to each variable: structural shocks to inflation and
unemployment (C(9) = 2.068 and C(10) = 1.256) have stronger effects than those to
GDP and public spending (C(7) = C(8) = 0.019), which may reflect the greater
volatility or sensitivity of these variables in the Algerian economy.

Overall, the estimated SVAR model enables clear identification of structural shocks,
although the contemporaneous relationships between some variables are not
statistically robust. This can be attributed to delays in the transmission of economic
policies, institutional rigidities or data quality. However, the significance of own
shocks (matrix B) provides a solid basis for the analysis of impulse response functions
(IRF) and variance decomposition, enabling reliable conclusions to be drawn about
the transmission dynamics of shocks in the Algerian economy.

Impulse responses of macroeconomic variables to a positive shock in public
spending
The impulse response functions presented in this Table describe the dynamic reaction
of four Algerian macroeconomic variables (real GDP, public spending, inflation,
unemployment) to a positive shock in real public spending. From the first period
onwards, public spending (EXP) reacts strongly to the shock (0.0191), which is

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