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

Bouoiyour, Jamal and REY, Serge (2005): Exchange Rate Regime, Real Exchange Rate, Trade Flows and Foreign Direct Investments: The case of Morocco. Published in: African Review of Development , Vol. 2, No. 17 (2005): pp. 302-334.

Abstract

We study the behavior of the Real Effective Exchange Rate (REER) of the dirham against the European currencies (Europe of the 15), 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 (NATREX model). We show that a rise of the volatility of the dirham reduces the trade flows (exports and imports). The misalignments affect also the trade flows: an overvaluation leads to a reduction in Morocco exports from, to a raise of 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 the direct investments (FDI) in favor of Morocco.

• Item Type: MPRA Paper
• Language: English
• Keywords: REER, NATRXE, FDI, Mesalignment Cointegration
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements

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