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Real Exchange Rate of Moroccan Currency: Appreciated or Depreciated?

Author

Listed:
  • Mohammed Amine Lezar

    (Senior Expert, Arab Planning Institute, P.O. Box 5834 Safat 13059, State of Kuwait.)

Abstract

In this paper, we measure and evaluate the real parity of the Moroccan dirham during the period 1980-2020. The objective is to highlight the evolution of the real exchange rate of the dirham, and in particular to show if whether it has been overvalued against currencies of the main trading partners and competitors of Morocco. Contrary to many studies which used a simple method to calculate the real parity which consisted of assigning each country of the main trading partners a relative weight equivalent to its share in Morocco's external trade, we calculate the weights by combining both bilateral import weights and a double weighting for export to reflect both importance of each country in Morocco's import and export as well as the degree of competition of exporters in usual third markets. Calculation of real parity of the dirham reveals three main periods: a strong depreciation during 1980-1990; an appreciation during the period 1991-2000; and a resumption of a weaker depreciation for the last period (2001-2020). These trends are related to both changes in nominal effective exchange rate and in relative prices. Results obtained in the present paper are generally close to those calculated by the International Monetary Fund for Morocco and are strongly correlated with them and the trends in both remain the same.

Suggested Citation

  • Mohammed Amine Lezar, 2023. "Real Exchange Rate of Moroccan Currency: Appreciated or Depreciated?," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 89-101, January.
    • Handle: RePEc:eco:journ1:2023-01-11
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    References listed on IDEAS

    as
    1. Juan Carlos Cuestas & Mercedes Monfort & Bojan Shimbov, 2022. "Has the relationship between the real exchange rate and its fundamentals changed over time?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 22(2), pages 68-89.
    2. Pierre-Richard Agénor & Karim El Aynaoui, 2015. "MOROCCO : Growth strategy for 2025 in an evolving international environment," Books & Reports, Policy Center for the New South, number 2, December.
    3. Agnès Bénassy, 1993. "Comment se fixent les taux de change ? Un bilan," Économie et Prévision, Programme National Persée, vol. 107(1), pages 37-62.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Real exchange rate; Appreciation; Moroccan Dirham;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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