Sources of Fluctuations in the Real Exchange Rate in Morocco
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Description
In this book, we examine the impact of nominal and real shocks on the behavior of the real exchange rate of the Moroccan dirham. To do so, we use a long-run structural vector autoregression (SVAR) approach, based on a Mundell–Fleming–Dornbusch type model, to identify the three types of shocks in the traditional investment-savings and liquidity preference-money supply (IS-LM) framework: real supply shocks; real demand shocks; and nominal shocks. We find that real shocks play a dominant role in exchange rate fluctuations, suggesting that a floating exchange rate may be preferable to the exchange rate regime in Morocco.
Therefore, we can say that the exchange rate plays a role as a shock absorber in the Moroccan economy.