The effect of exchange rates on economic growth in Morocco (1970–2022)

Abstract

This article offers an analysis of the relationship between the exchange rate and economic growth in Morocco over the period 1970–2022. Using an econometric model of the ARDL type, the study examines both the long-term and short-term effects of the exchange rate regime on the country's economic growth dynamics.

The results reveal the complexity and ambivalence of the relationship between the variables under study. On one hand, a competitive exchange rate can foster growth by enhancing export competitiveness and attracting foreign direct investment. On the other hand, excessive exchange rate volatility, particularly in the case of prolonged depreciation, may increase macroeconomic uncertainty, weigh on the trade balance, and undermine the country's financial stability.

Conversely, a significant appreciation of the exchange rate may help contain imported inflation but at the cost of eroding external competitiveness. Therefore, the impact of the exchange rate on economic growth appears to be highly dependent on the macroeconomic context, the institutional framework, and the transmission channels mobilized by monetary authorities.

This contribution highlights the lack of clear consensus in the economic literature regarding the effects of the exchange rate on growth, while emphasizing the need for nuanced and context-specific exchange rate management in emerging economies such as Morocco.

JEL Classification : F31, E43, O47, F41  

Paper type: empirical research.