Capital account liberalization and exchange rate flexibility: Scenarios for the Moroccan case
Elhadj Ezzahid and
No 2014-18, Economics Discussion Papers from Kiel Institute for the World Economy (IfW)
This paper explores the links between gradual capital account liberalization and the exchange rate regime in Morocco where the process of economic and financial openness is relatively advanced. Using a game theory model with two economic agents, that are monetary authorities and domestic firms, we explore the best choice concerning the exchange rate regime for Morocco in a context characterised by increasing openness especially of capital account. The results show that welfare under a flexible exchange rate regime is higher compared to welfare under a fixed exchange rate regime. The analysis also shows that the flexible exchange rate will improve competitiveness. However, flexibility will undermine price stability.
Keywords: capital account liberalization; exchange rate regime; competitiveness; inflation; Morocco (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara, nep-cba, nep-ifn, nep-int, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201418
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