The asymmetric effect of exchange rate fluctuations on economic growth in Morocco: Application of non-linear ARDL approach

Résumé

Exchange rate changes have a great impact on different macroeconomic variables and in particular on economic growth. This study claims to give a suitable measure of exchange rate fluctuations impact on growth in Morocco. In this study, we employ two techniques; namely Autoregressive distributed lags and non-linear Autoregressive distributed lags to test for possible asymmetric effect of exchange rate on gross domestic product along with the proxies of fiscal and monetary policies (money supply and public expenditures). The results showed the existence of a correlation relationship between variables, whereas, the nonlinear autoregressive distributed lags approach confirmed that there is no asymmetric effect of exchange rate fluctuations on economic growth in Morocco in the short and long run. In addition, we found that week currency hurts growth, while strong currency adds to growth. Besides these, we confirm symmetric impact of exchange rate on economic growth in Morocco and don’t find evidence of short and long run asymmetry in the ER variations.