Impact of exchange rate volatility on exports: The case of Morocco

This study analyes the impact of exchange rate volatility on Moroccan exports using cointegration and the vector error correction model (VECM) for the period 1998:Q1-2014:Q4. The results obtained are mixed and vary according to the measuring procedure of the volatility that has been used. Our estimates indicate a significant and positive effect of the standard deviation of the moving average of the logarithm of real effective exchange rate on exports of goods and services, while the exchange rate measure determined from EGARCH modeling is negative and statistically highly significant. In addition, the analysis of general impulse response functions (GIRF) shows that exchange rate volatility has a persistent negative effect on real exports. This article recommends the measures that will further encourage exports and facilitate the transition to a flexible exchange rate regime.