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Exchange rate policy and sectoral competitiveness in Morocco: Vector autoregressive model

Author

Listed:
  • Issam BOUSALAM

    (High School of Technology, University Moahammed Premier Oujda)

  • Ahmed KHATTAB

    (Faculty of Economics, Abdelmalek Essaadi University, Tangier – Morocco)

  • Yahya SALMI

    (Faculty of Economics, Abdelmalek Essaadi University, Tangier – Morocco)

Abstract

The objective of this work is to study the exchange rate policy and its impact on sectoral competitiveness in Morocco. For this issue we used a VAR econometric model with annual data covering a period from 1990 to 2020. As a result of this study, we found that the exchange rate policy adopted and applied by the Moroccan monetary authorities showed that the real effective exchange rate experienced an appreciation that is, a loss of competitiveness. Thus, the monetary authorities have chosen the second course of action which is the gradual flexibility of the exchange rate regime and the improvement of the weak performance of exports. This is done through the diversification of production structures on the one hand and the diversification of exports on the other. Indeed, the overvaluation of the national currency results in a loss of competitiveness towards foreign countries, which means that domestic goods cost more than they should. Conversely, when the domestic currency is undervalued, this allows a gain in competitiveness.

Suggested Citation

  • Issam BOUSALAM & Ahmed KHATTAB & Yahya SALMI, 2021. "Exchange rate policy and sectoral competitiveness in Morocco: Vector autoregressive model," Turkish Economic Review, EconSciences Journals, vol. 8(2), pages 34-44, June.
    • Handle: RePEc:cvv:journ2:v:8:y:2021:i:2:p:34-44
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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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