IDEAS home Printed from https://ideas.repec.org/a/cvv/journ2/v11y2024i3-4p88-101.html

Explicative determinants of real exchange rate volatility in Morocco: An econometric approach

Author

Listed:
  • Issam BOUSALAM

    (Université Mohammed Premier, Oujda, Morocco)

  • Ahmed KHATTAB

    (Abdelmalek Essaadi University, Tangier, Morocco)

  • Yahya SALMI

    (Abdelmalek Essaadi University, Tangier, Morocco)

Abstract

This paper aims to present a theoretical framework regarding the determinants of Moroccan Real Effective Exchange Rate (REER) volatility and to define the influential factors affecting it for the Moroccan economy between 1980 and 2020. This objective is primarily motivated by the recent changes adopted by Moroccan authorities towards a flexible exchange rate regime, which includes a progressive widening of the fluctuation range of the exchange rate. In this study, we used a GARCH(1,1) model and applied an Error Correction Model (ECM) with an estimation of the Autoregressive Distributed Lag (ARDL) approach. We found strong evidence that, in the long run, foreign direct investments, commercial openness, and terms of trade have a statistically significant negative impact on the volatility of the Moroccan REER, while the latter has a positive influence. Additionally, external debt, public expenditure, and the applied exchange rate regime positively affect REER volatility; in other words, they contribute to increased volatility in the foreign exchange market and the Moroccan economy. Conversely, the money supply has a negative impact, and the inflation rate has a positive effect on the studied volatility; however, these last results are not statistically significant.

Suggested Citation

  • Issam BOUSALAM & Ahmed KHATTAB & Yahya SALMI, 2024. "Explicative determinants of real exchange rate volatility in Morocco: An econometric approach," Turkish Economic Review, EconSciences Journals, vol. 11(3-4), pages 88-101, November.
    • Handle: RePEc:cvv:journ2:v:11:y:2024:i:3-4:p:88-101
    as

    Download full text from publisher

    File URL: https://journals.econsciences.com/index.php/TER/article/download/2495/3247
    Download Restriction: no
    File URL: https://journals.econsciences.com/index.php/TER/article/view/2495
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. Paul Alagidede & Muazu Ibrahim, 2017. "On the Causes and Effects of Exchange Rate Volatility on Economic Growth: Evidence from Ghana," Journal of African Business, Taylor & Francis Journals, vol. 18(2), pages 169-193, April.
    3. Omar Bakkou, 2015. "Flexibility of the Exchange Rate Regime and Exchange Regulation in Morocco," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 5(4), pages 1-10.
    4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    5. Morana, Claudio, 2009. "On the macroeconomic causes of exchange rate volatility," International Journal of Forecasting, Elsevier, vol. 25(2), pages 328-350.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Trust R. Mpofu, 2021. "The determinants of real exchange rate volatility in South Africa," The World Economy, Wiley Blackwell, vol. 44(5), pages 1380-1401, May.
    2. Bloch, Harry & Rafiq, Shuddhasattwa & Salim, Ruhul, 2015. "Economic growth with coal, oil and renewable energy consumption in China: Prospects for fuel substitution," Economic Modelling, Elsevier, vol. 44(C), pages 104-115.
    3. Naseem, N.A.M & Tan, Hui-Boon & Hamizah, M.S, 2008. "Exchange Rate Misalignment, Volatility and Import Flows in Malaysia," MPRA Paper 41571, University Library of Munich, Germany.
    4. Md.Yousuf & Raju Ahmed & Nasrin Akther Lubna & Shah Md. Sumon, 2019. "Estimating the Services Sector Impact on Economic Growth of Bangladesh: An Econometric Investigation," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 7(2), pages 62-72, June.
    5. Muhammad Shafiullah & Ravinthirakumaran Navaratnam, 2016. "Do Bangladesh and Sri Lanka Enjoy Export-Led Growth? A Comparison of Two Small South Asian Economies," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(1), pages 114-132, March.
    6. Zheng, Li & Abbasi, Kashif Raza & Salem, Sultan & Irfan, Muhammad & Alvarado, Rafael & Lv, Kangjuan, 2022. "How technological innovation and institutional quality affect sectoral energy consumption in Pakistan? Fresh policy insights from novel econometric approach," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    7. Peter Rowland, 2004. "The Colombian Sovereign Spread and its Determinants," Borradores de Economia 315, Banco de la Republica de Colombia.
    8. repec:rza:wpaper:029 is not listed on IDEAS
    9. Chen, Yichun & Subhan, Mohammad & Ahmad, Gayas & Adil, Mohd & Zamir, M.N., 2024. "Unveiling the linkages among digital technology, economic growth, and carbon emissions: A resource management perspective," Resources Policy, Elsevier, vol. 91(C).
    10. Shawkat Hammoudeh & Amine Lahiani & Duc Khuong Nguyen & Ricardo M. Sousa, 2014. "Asymmetric and nonlinear passthrough of energy prices to CO2 emission allowance prices," Working Papers 2014-82, Department of Research, Ipag Business School.
    11. Waseem Khan & Vishal Sharma & Saghir Ahmad Ansari, 2022. "Modeling the dynamics of oil and agricultural commodity price nexus in linear and nonlinear frameworks: A case of emerging economy," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1733-1784, August.
    12. Herzer Dierk, 2022. "Semi-endogenous Versus Schumpeterian Growth Models: A Critical Review of the Literature and New Evidence," Review of Economics, De Gruyter, vol. 73(1), pages 1-55, April.
    13. Mohammad I. Elian & Khalid M. Kisswani, 2018. "Oil price changes and stock market returns: cointegration evidence from emerging market," Economic Change and Restructuring, Springer, vol. 51(4), pages 317-337, November.
    14. Chen, Pei-Fen & Chien, Mei-Se & Lee, Chien-Chiang, 2011. "Dynamic modeling of regional house price diffusion in Taiwan," Journal of Housing Economics, Elsevier, vol. 20(4), pages 315-332.
    15. Hande Aksöz Yılmaz, 2020. "The Impact of Foreign Trade on Immigration from Turkey to Germany: ARDL Bounds Test Approach," Journal of Economy Culture and Society, Istanbul University, Faculty of Economics, vol. 62(62), pages 123-143, December.
    16. Utku ALTUNÖZ, 2018. "Investigating the Presence of Fisher Effect for the China Economy," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(35).
    17. Ibrar Hussain & Zahoor Khan & Muhmmad Rafiq, 2017. "Compositional Changes in Public Expenditure and Economic Growth: Time Series Evidence from Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(1), pages 1-20, March.
    18. Karolina Konopczak & Aleksander Łożykowski, 2021. "Efekt fiskalny uszczelniania systemu podatkowego w Polsce: próba oszacowania w zakresie podatku CIT," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 1, pages 25-55.
    19. Özcan Karahan & Olcay Çolak, 2019. "Examining the Validity of Wagner's Law versus Keynesian Hypothesis: Evidence from Turkey's Economy," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 66(1), pages 117-130, March.
    20. Abdhut Deheri & Stefy Carmel, 2024. "Do fluctuations in global crude oil prices have an asymmetric effect on oil product pricing in India?," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-22, February.
    21. Siddiqi, Umema, 2021. "Estimating Long-Run Cointegration between Gold Prices and its Determinants," MPRA Paper 103182, University Library of Munich, Germany.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cvv:journ2:v:11:y:2024:i:3-4:p:88-101. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bilal KARGI (email available below). General contact details of provider: https://journals.econsciences.com/index.php/TER .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.