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The world is nowadays facing major environmental damage and climate change everywhere. Carbon dioxide emissions are major causes of such change. It is in this respect that the current study provides a fresh insight into the dynamic nexus between energy consumption (EC), economic growth (EG) and CO₂ emissions in Algeria, as it is considered as one of the top CO₂ emitters in Africa.

The authors use the wavelet approaches and Breitung and Candelon (2006) causality test to gauge the association between EC, EG and CO₂ emissions over the period 1971–2018. Specifically, this study implements the wavelet power spectrum (WPS) to identify the power and variability of each variable at different time scales. The wavelet coherence, phase differences and partial wavelet coherence are also used to assess the co-movement and lead lag relationship between economic growth, energy consumption and CO₂ emissions over different time scale. Finally, Breitung and Candelon (2006) causality test is used to find the causality among variables.

The wavelet power spectrum results indicate that economic growth, energy consumption and CO₂ emissions share common strong variance in the medium and long run. Furthermore, the wavelet coherence results suggest that there is a significant co-movement between EG and CO₂ emissions, and EG is the leading variable for CO₂ emissions and EC. The results also unveil that both EG and EC cause CO₂ emissions both in short and long run. The results suggest that Algeria should take suitable measures towards the promotion of renewable energy sources.

The present empirical study filled the literature gap of applying the wavelet approach and frequency domain spectral causality test to examine this relevant issue for Algeria.

This paper aims to examine the relationship between exchange rate and oil prices in Algeria over the period 2004Q1–2019Q4.

The nonlinear autoregressive distributed lag method is used to capture the potential asymmetric relationship among oil prices and the exchange rate. Frequency domain spectral Granger causality test is also applied to investigate the causal linkage between the two variables. The wavelet coherence is applied to analyze the evolution of this relationship both in time and frequency domains.

The empirical results reveal evidence of long-run asymmetric effects of oil price on Algeria’s real effective exchange rate (REER), implying that an increase in oil price causes a real exchange rate to appreciate, while a decrease in oil price leads to a real exchange rate to depreciate. More specifically, it is found that the impact of negative oil price shocks is higher than the one associated with positive shocks. The spectral Granger causality results further indicate that there is unidirectional causality running from oil price to REER in both medium and long run. The wavelet coherence findings provide evidence of some co-movement between the REER and oil price and point out that the oil price is leading real exchange rate in the medium and long terms.

This study contributes to the literature by investigating the asymmetric impact and the time domain causal linkage between oil price fluctuations and real exchange rate in Algeria.