Channeling of the Real Exchange Rate and price stability: An Empirical Study for the Moroccan Case

Canalisation du Taux de Change Réel et stabilité des prix: Une étude Empirique pour le cas marocain

Souad Baya (), Mohamed Simoh () and Ghizlan Loumrhari ()
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Souad Baya: INSEA - Institut National de Statistique et d’Economie Appliquée [Rabat]
Mohamed Simoh: UAE - Abdelmalek Essaadi University [Tétouan] = Université Abdelmalek Essaadi [Tétouan]
Ghizlan Loumrhari: UAE - Abdelmalek Essaadi University [Tétouan] = Université Abdelmalek Essaadi [Tétouan]

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Abstract: The economic debate surrounding the impact of exchange rate fluctuations on prices has sparked in-depth discussions, leading to several conclusions supported by empirical literature. Fundamentally, it exerts significant pressure on competitiveness, price stability, and other fundamental macroeconomic variables. The primary objective of this study is to theoretically and empirically examine the effects of exchange rate fluctuations on inflation. Specifically, this paper aims to assess the Pass-Through coefficient from the exchange rate to domestic prices and analyze its evolution over time. To account for the reciprocal interactions between inflation and exchange rate variations, we will use a model based on quarterly data covering the period from Q1-2000 to Q4-2021. Conclusions drawn from the analysis of impulse response functions and variance decomposition indicate that any shock to the exchange rate results in a significant inflation response. Furthermore, this reaction appears to reflect an incomplete degree of the transmission mechanism. Additionally, our findings have shown that the mentioned coefficient experienced a surge from the first to the second period, similar to various advanced economies that underwent an increase in Pass-Through over time.

Keywords: Real Exchange Rate pass-through; SVAR; shocks; imported inflation; impulse responses; variance decomposition; Pass-through du Taux de Change Réel; chocs; inflation importé; réponses impulsionnelles; décomposition de la variance (search for similar items in EconPapers)
Date: 2024-01-22
New Economics Papers: this item is included in nep-ara, nep-mon and nep-opm
Note: View the original document on HAL open archive server: https://hal.science/hal-04450899
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Published in International Journal of Accounting, Finance, Auditing, Management and Economics, 2024, 5 (1), pp.68-89. ⟨10.5281/zenodo.10547424⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04450899

DOI: 10.5281/zenodo.10547424

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