Morocco at the External Growth Ceiling: Evidence from Thirlwall's Law, 1998-2024

Abstract

This paper asks whether Morocco's long-run growth remained balance-of-payments constrained after the pandemic and whether travel receipts, workers' remittances, foreign direct investment and the terms of trade jointly alter that constraint. The central research question is whether observed growth over 1998-2024 matches the external ceiling predicted by Thirlwall's Law. The primary hypothesis expects the two rates to be close; three secondary hypotheses assess non-trade foreign-exchange earnings, capital inflows and relative-price effects. This empirical article uses 27 annual observations from Morocco's Office des Changes and the World Development Indicators. It estimates the income elasticity of merchandise imports by ordinary least squares with Newey-West standard errors and supplements the levels relationship with ADF and Phillips-Perron unit-root tests, Engle-Granger and Johansen cointegration tests, an error-correction model, Granger-causality, structural-break and variance-inflation diagnostics. Moving-block bootstrap intervals propagate numerator and elasticity uncertainty. The preferred import-income elasticity is 1.278, implying a classical compatible growth rate of 3.50%, compared with observed real GDP growth of 3.56%. Its 95% interval, 0.51% to 6.25%, requires caution rather than a mechanical ceiling interpretation. Adding travel and remittances raises the accounting estimate to 4.31%, but does not establish a permanent structural relaxation. The error-correction coefficient is negative and significant, while the real effective exchange-rate coefficient is statistically insignificant. The main limitations are the small annual sample, borderline cointegration evidence and the use of consumer-price deflation for non-trade flows when component-specific volume indices are unavailable. The results support a coordinated strategy of export diversification, efficient import substitution and prudent management of foreign-exchange inflows.

JEL Classification: F32; F43; O11; C22.

Paper type: Empirical research.