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Exchange Rate Policy in Morocco and Persistence of Real Exchange Rate Misalignments

Author

Listed:
  • Mohamed BOUZAHZAH

    (Mohammed V - Souissi University, FSJES Sal , Morocco.)

  • Radouane BACHAR

    (Mohammed V - Agdal University, FSJES Rabat, Morocco.)

Abstract

In this paper, we measure, using Moroccan data, the misalignment of the real exchange rate of the Dirham, based on estimates in respect of the period from 1980 to 2012, a long term relationship between the real exchange rate and its fundamentals: namely terms of trade, trade policy, the growth rate of real GDP, Gross Fixed Capital Formation, the flow of foreign capital and government spending. The objective of this article is to highlight the persistent nature of misalignments of the real exchange rate of the Dirham, especially since the adoption by Morocco of a policy exchange rate based on the attachment of the Dirham to a basket of currency and fixing the nominal exchange rate by the monetary authorities. The econometric estimations show that persistent misalignments may find its explanation in the structural characteristics of the Moroccan economy represented by the fundamental variables used in the estimated model (productivity, investment, trade policy, etc.)

Suggested Citation

  • Mohamed BOUZAHZAH & Radouane BACHAR, 2014. "Exchange Rate Policy in Morocco and Persistence of Real Exchange Rate Misalignments," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 122-134.
    • Handle: RePEc:eco:journ1:2014-01-12
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    References listed on IDEAS

    as
    1. Jamal Bouoiyour & Velayoudom Marimoutou & Serge Rey, 2004. "Taux de change reel d'equilibre et politique de change au Maroc : une approche non parametrique," Economie Internationale, CEPII research center, issue 97, pages 81-104.
    2. Lahcen Achy & Khalid Sekkat, 2007. "L'économie marocaine en questions: 1956-2006," ULB Institutional Repository 2013/14345, ULB -- Universite Libre de Bruxelles.
    3. William Ellery Channing, 1994. "Change," American Journal of Economics and Sociology, Wiley Blackwell, vol. 53(1), pages 15-15, January.
    4. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, October.
    5. Mr. Ronald MacDonald & Mr. Peter B. Clark, 1998. "Exchange Rates and Economic Fundamentals: A Methodological Comparison of BEERs and FEERs," IMF Working Papers 1998/067, International Monetary Fund.
    6. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
    7. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-1393, September.
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    Cited by:

    1. repec:eco:journ1:2014-03-09 is not listed on IDEAS
    2. Abdessalem GOUIDER & Ridha NOUIRA, 2014. "The Impact of Misalignment on FDI in the Developing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 784-800.
    3. Mokhtar Benlamine & Mr. Ales Bulir & Meryem Farouki & Ágnes Horváth & Faical Hossaini & Hasnae El Idrissi & Zineb Iraoui & Mihály Kovács & Mr. Douglas Laxton & Anass Maaroufi & Katalin Szilágyi & Moha, 2018. "Morocco: A Practical Approach to Monetary Policy Analysis in a Country with Capital Controls," IMF Working Papers 2018/027, International Monetary Fund.
    4. Michael Takudzwa Pasara & Vincent Mugwira, 2023. "Exchange Rate (MIS-) Alignment: An Application of the Behavioural Equilibrium Exchange Rate (beer) Approach to Zimbabwe (1990-2018)," International Journal of Economics and Financial Issues, Econjournals, vol. 13(5), pages 128-141, September.

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    More about this item

    Keywords

    equilibrium real exchange rate; misalignment; cointegration; persistence.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • 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
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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