On The Optimality of The Maghreb Area: An Analysis of The Macroeconomic Shocks

Mohamed Ben Abdallah and Zouheir Bouchaddakh

No 473, Working Papers from Economic Research Forum

Abstract: This paper studies the possibility of a monetary union in the Maghreb using the traditional criteria of the optimal currency areas theory. Firstly, we examine the degree of shocks correlation in order to see whether the shocks affecting Maghreb countries are symmetrical or asymmetrical. The analysis of the growth rates reveals dispersions and that of the inflation rates shows that essential efforts remain to be made with regards to monetary cooperation. By developing a structural VAR model based on the methodology of Blanchard and Quah (1989), we show that the macroeconomic shocks are rather heterogeneous in this area supporting the assumption of a relatively high dispersion of economic growth rates. However, our results reveal a relative symmetry of the supply shocks between Morocco and Tunisia.

Pages: 18 pages
Date: 2009-03, Revised 2009-03
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Published by The Economic Research Forum (ERF)

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