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Capital account liberalization and exchange rate flexibility: Scenarios for the Moroccan case

Elhadj Ezzahid and Brahim Maouhoub

No 2014-18, Economics Discussion Papers from Kiel Institute for the World Economy (IfW)

Abstract: 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
Date: 2014
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http://www.economics-ejournal.org/economics/discussionpapers/2014-18
https://www.econstor.eu/bitstream/10419/96210/1/783682212.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201418

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