Exchange Rate Regime, Real Exchange Rate, Trade Flows and Foreign Direct Investments: The Case of Morocco

Authors: Bouoiyour, Jamal; Rey, Serge

Source: African Development Review, Volume 17, Number 2, September 2005 , pp. 302-334(33)

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Abstract:

We study the behavior of the Real Effective Exchange Rate (REER) of the dirham against the European currencies (the EU15), over the period 1960–2000 (annual data). We measure the volatility using standard deviation, and the misalignments as the difference between the actual REER and the equilibrium REER (the NATREX model). We show that a rise in the volatility of the dirham reduces the trade flows (exports and imports). The misalignments also affect the trade flows: an overvaluation leads to a reduction in Morocco exports, to an increase in Morocco imports, and globally to a deterioration of the trade balance with the European Union. On the other hand, neither the volatility nor the misalignments have an effect on foreign direct investment in favor of Morocco.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1017-6772.2005.00117.x

Affiliations: 1: Jamal Bouoiyour, Department of Economics, C.A.T.T, University of Pau and Pays de l'Adour, France and Al Akhawayn University, Ifrane, Morocco; ; Corresponding author: Serge Rey, Department of Economics, C.A.T.T, University of Pau et Pays de l'Adour, Avenue du Doyen Poplawski, 64016 Pau Cedex, France; e-mail: Serge.rey@univ-pau.fr., Email: Jamal.bouoiyour@univ-pau.fr

Publication date: 2005-09-01