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Private investment under macroeconomic adjustment in Morocco


  • Schmidt-Hebbel, Klaus
  • Muller, Tobias


A significant domestic counterpart of Morocco's vigorous external adjustment in the eighties was a decline in fixed capital formation, of which the private sector bore a sizable share. The authors focus on the causes of declining private investment and on the policiesrequired to reverse this trend. Using an eclectic framework, they econometrically determine the main determinants of private investment in Morocco. They conclude that the main causes of the decline in the eighties were great uncertainty about policy (proxied by foreign debt), a rapid rise in the cost of capital, a more stringent credit policy, and reduced public capital. They further conclude that fiscal stabilization, a consistent foreign debt policy, more investment in public infrastructure, and a reform of investment codes would increase private investment and growth in Morocco. Moreover, reform of the financial sector could significantly improve the efficiency of financial intermediation and therefore the quality of investment in Morocco.

Suggested Citation

  • Schmidt-Hebbel, Klaus & Muller, Tobias, 1991. "Private investment under macroeconomic adjustment in Morocco," Policy Research Working Paper Series 787, The World Bank.
  • Handle: RePEc:wbk:wbrwps:787

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    Cited by:

    1. Ahmet Faruk Aysan & …mer Faruk Baykal & Marie-Ange Véganzonès–Varoudakis, 2011. "The Effects of Convergence in Governance on Capital Accumulation in the Black Sea Economic Cooperation Countries," Chapters,in: Does Economic Governance Matter?, chapter 6 Edward Elgar Publishing.
    2. Ahmet Aysan & Gaobo Pang & Marie-Ange Veganzones-Varoudakis, 2009. "Uncertainty, economic reforms and private investment in the Middle East and North Africa," Applied Economics, Taylor & Francis Journals, vol. 41(11), pages 1379-1395.
    3. Aysan, Ahmet Faruk & Nabli, Mustapha Kamel & Veganzones-Varoudakis, Marie-Ange, 2006. "Governance and private investment in the Middle East and North Africa," Policy Research Working Paper Series 3934, The World Bank.
    4. Stanley Fischer, 1992. "Macroeconomic Stability and Growth," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(87), pages 171-186.
    5. Agenor, Pierre-Richard & Aynaoui, Karim El, 2003. "Labor market policies and unemployment in Morocco : a quantitative analysis," Policy Research Working Paper Series 3091, The World Bank.
    6. Marie-Ange VEGANZONES-VAROUDAKIS & PANG & Ahmet Faruk AYSAN, 2006. "Assessing the Responsiveness of Private Investment to Economic Reforms: The Case of MENA Countries," Working Papers 200623, CERDI.
    7. James Ang, 2008. "Private Investment And Financial Sector Policies In Developing Countries," Monash Economics Working Papers 07/08, Monash University, Department of Economics.


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