Journal of African Development

This study aims to analyze the impact of public expenditure structure, both current and investment, on domestic investment in Algeria over the period 2000–2023. The ARDL model was employed to capture both short-run and long-run relationships among the variables. The results reveal a long-run equilibrium relationship between public expenditure and domestic investment; however, the coefficients of both current and investment expenditure were found to be statistically insignificant in the long run. This outcome reflects the limited effectiveness of fiscal policy in fostering domestic investment, mainly due to the rentier nature of the Algerian economy and institutional inefficiencies. In contrast, the short-run estimates show significant and positive effects of both investment and current expenditure on domestic investment, where the former stimulates productive activities through infrastructure projects and development programs, while the latter drives the economic cycle via wages, subsidies, and social spending..