The Real Exchange Rate Misalignment: Application of Behavioral Equilibrium Exchange Rate BEER to Morocco1980Q1–2012Q4
International Journal of Economics and Finance; Vol. 5, No. 10; 2013
ISSN 1916-971XE-ISSN 1916-9728
Published by Canadian Center of Science and Education
The Real Exchange Rate Misalignment: Application of Behavioral
Equilibrium Exchange Rate BEER to Morocco1980Q1–2012Q4
Hind Lebdaoui1
1
School of finance, Shanghai University of Finance & Economics, Shanghai, China
Correspondence: Hind Lebdaoui, School of finance, Shanghai University of Finance & Economics, Shanghai
200083, China. Tel: 86-134-0218-8777. E-mail: hind.encg@gmail.com
Received: July 31, 2013 doi:10.5539/ijef.v5n10p36 Accepted: August 15, 2013
Online Published: September 26, 2013
URL: http://dx.doi.org/10.5539/ijef.v5n10p36
Abstract
This study is an attempt to estimate the behavioral equilibrium exchange rate in Morocco. Since the equilibrium value is unobservable, we use a set of fundamentals supposed to affect the exchange rate movements including the real net capital flows (NKF), terms of trade shocks (TOT), government fiscal stance (GOV), foreign reserve level (RES), index of monetary policy (MOP) and relative productivity (PROD) to get it. Using quarterly data from 1980Q1 to 2012Q4, the empirical analysis commences by checking the stationarity of the variables that turn out to be all stationary at first difference. Then, using the cointegration test and the Vector-Error Correction
Model of the Moroccan Dirham exchange rate as function of the indicated macroeconomic fundamentals, the regression shows that the main fluctuations of the real effective exchange rate are due to trade openness, government spending, terms of trade, the productivity progress, monetary policy and net capital inflow.
Accordingly, and using HP decomposition filter we figure out three periods of under/overvaluation ranging from
2.80% under to 2.16% over equilibrium level, furthermore, the misalignment from the equilibrium level needs from five to six years to be eliminated.
Keywords:
ISSN 1916-971XE-ISSN 1916-9728
Published by Canadian Center of Science and Education
The Real Exchange Rate Misalignment: Application of Behavioral
Equilibrium Exchange Rate BEER to Morocco1980Q1–2012Q4
Hind Lebdaoui1
1
School of finance, Shanghai University of Finance & Economics, Shanghai, China
Correspondence: Hind Lebdaoui, School of finance, Shanghai University of Finance & Economics, Shanghai
200083, China. Tel: 86-134-0218-8777. E-mail: hind.encg@gmail.com
Received: July 31, 2013 doi:10.5539/ijef.v5n10p36 Accepted: August 15, 2013
Online Published: September 26, 2013
URL: http://dx.doi.org/10.5539/ijef.v5n10p36
Abstract
This study is an attempt to estimate the behavioral equilibrium exchange rate in Morocco. Since the equilibrium value is unobservable, we use a set of fundamentals supposed to affect the exchange rate movements including the real net capital flows (NKF), terms of trade shocks (TOT), government fiscal stance (GOV), foreign reserve level (RES), index of monetary policy (MOP) and relative productivity (PROD) to get it. Using quarterly data from 1980Q1 to 2012Q4, the empirical analysis commences by checking the stationarity of the variables that turn out to be all stationary at first difference. Then, using the cointegration test and the Vector-Error Correction
Model of the Moroccan Dirham exchange rate as function of the indicated macroeconomic fundamentals, the regression shows that the main fluctuations of the real effective exchange rate are due to trade openness, government spending, terms of trade, the productivity progress, monetary policy and net capital inflow.
Accordingly, and using HP decomposition filter we figure out three periods of under/overvaluation ranging from
2.80% under to 2.16% over equilibrium level, furthermore, the misalignment from the equilibrium level needs from five to six years to be eliminated.
Keywords:
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