Discussion Paper

No. 2014-18 | April 16, 2014
Capital Account Liberalization and Exchange Rate Flexibility: Scenarios for the Moroccan Case

Abstract

This paper explores the links between gradual capital account liberalization and the exchange rate regime in Morocco where the process of economic and financial openness is relatively advanced. Using a game theory model with two economic agents, that are monetary authorities and domestic firms, we explore the best choice concerning the exchange rate regime for Morocco in a context characterised by increasing openness especially of capital account. The results show that welfare under a flexible exchange rate regime is higher compared to welfare under a fixed exchange rate regime. The analysis also shows that the flexible exchange rate will improve competitiveness. However, flexibility will undermine price stability.

JEL Classification

F31 F32

Cite As

Elhadj Ezzahid and Brahim Maouhoub (2014). Capital Account Liberalization and Exchange Rate Flexibility: Scenarios for the Moroccan Case. Economics Discussion Papers, No 2014-18, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2014-18

Assessment



Comments and Questions


Anonymous - Referee Report 1
June 02, 2014 - 08:47

see attached file


Anonymous - Referee Report 2
July 10, 2014 - 08:39

see attached file