Exchange Policy and Misalignments in Morocco: A Quantitative Analysis

Pascal Pouya, Mohamed Karim, Anass Arbia, Mohammed El Yazidi and Khalid Sobhi
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Pascal Pouya: Macroeconomics and Public Policy Research Team, Faculty of Law, Economics and Social Sciences of Salé, Mohammed V University, Rabat, Morocco
Mohamed Karim: Macroeconomics and Public Policy Research Team, Faculty of Law, Economics and Social Sciences of Salé, Mohammed V University, Rabat, Morocco
Anass Arbia: Macroeconomics and Public Policy Research Team, Faculty of Law, Economics and Social Sciences of Salé, Mohammed V University, Rabat, Morocco
Mohammed El Yazidi: Macroeconomics and Public Policy Research Team, Faculty of Law, Economics and Social Sciences of Salé, Mohammed V University, Rabat, Morocco
Khalid Sobhi: Macroeconomics and Public Policy Research Team, Faculty of Law, Economics and Social Sciences of Salé, Mohammed V University, Rabat, Morocco

International Journal of Economics and Financial Issues, 2024, vol. 14, issue 4, 9-17

Abstract: The research examines the equilibrium exchange rate and misalignment quantifications for the case of Morocco over the period 1990-2022. Based on an econometric model developed by Edwards in 1994, fundamental variables such as productivity, foreign direct investment (FDI), inflation and the real interest rate (RIR) are analysed to estimate the equilibrium value of the real exchange rate (REER) of the Moroccan dirham. The results show a cointegration between the REER and the fundamental variables, indicating the existence of a long-term relationship. The analysis of misalignments reveals periods of overvaluation and undervaluation of the Moroccan dirham, influenced by economic factors and monetary policies. This study has important implications for economic and monetary policy in Morocco, particularly with regard to export competitiveness and macroeconomic stability.

Keywords: Equilibrium Exchange Rate; Misalignment; Error Correction Model; Morocco (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2024
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