The sterilized intervention as a half-instrument to infringe upon the trilemma mandatory logic : Algerian case during 2000-2014

Abstract EN

Unquestionably, there is no way to infringe upon the trilemma logic, and the inevitable tradeoff will be driven by the necessity of the macroeconomic stability, i.e.

the central bank should sacrifice at least one determinant for the sake of maintaining the other two.

The study findings indicated that the Algerian economy was entirely subject to the trilemma imposed logic, and its choice has represented in both the monetary independence and the exchange rate stability.

Trying to infringe upon the aforementioned logic, the Algerian bank has theoretically provided the required conditions since it practices the sterilized intervention in light of the foreign currency inflows (Petrodollars), but the latter policy task has only had a concentrated positive impact on the domestic stability determinants (inflation and interest rate).

Regarding the exchange rate, the relationship was vague and statistically insignificant