Impact of the Misalignments of Exchange Rate on the Moroccan Competitiveness

Impact of the Misalignments of Exchange Rate on the Moroccan Competitiveness

The competitiveness of Moroccan business achieved against underperformance in recent years.

The exchange rate has often been questioned, due to its location by the monetary authorities and its peg to a basket of currencies. In this paper, we evaluate the effects of misalignment of the real effective exchange rate on the competitiveness of Moroccan firms for the period 1980 to 2012. For this purpose, we first serve a vector correction model error in order to estimate the real equilibrium exchange rate based on the exchange rate equilibrium behavioral approach, which allows us to determine misalignments.

Then we design a global competitiveness index for Moroccan companies. Finally we use the GMM method of Panel to estimate a reduced equation including traditional determinants of competitiveness, to which we add misalignments concerned. Our results show that misalignments act negatively on competitiveness, including the situation of overvaluation. However, situations of undervaluation penalize also competitiveness but less dramatically.

Key words: Misalignment, Exchange rate, Competitiveness, instrumental variables, Panel GMM. Jel classification: C23, C26, F31