<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This paper examines the opportunity of exchange rate regime flexibilization in Morocco under the policy of capital account liberalization. Basing on our findings in Ezzahid and Maouhoub (2014), we develop a new theoretical game model with four economic agents, namely: monetary authorities, government, foreign firms and domestic firms. We explore the optimal exchange rate regime for Morocco under new conditions such as the presence of a compensation fund effect, restrictions on capital outflows, etc. Starting with a first simulation based on current economic parameters, the results show that losses under a flexible exchange rate regime are lower than losses under a fixed exchange rate regime. Varying different parameters allow discovering the ‘appropriate level’ from which monetary authorities should move toward the flexible exchange rate.</p></abstract>

This paper examines the opportunity of exchange rate regime flexibilization in Morocco under the policy of capital account liberalization. Basing on our findings in Ezzahid and Maouhoub (2014), we develop a new theoretical game model with four economic agents, namely: monetary authorities, government, foreign firms and domestic firms. We explore the optimal exchange rate regime for Morocco under new conditions such as the presence of a compensation fund effect, restrictions on capital outflows, etc. Starting with a first simulation based on current economic parameters, the results show that losses under a flexible exchange rate regime are lower than losses under a fixed exchange rate regime. Varying different parameters allow discovering the ‘appropriate level’ from which monetary authorities should move toward the flexible exchange rate.

Capital Account Liberalization in Morocco: Is it Compatible with Fixed or Flexible Exchange Rate Regime?

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

This paper examines the opportunity of exchange rate regime flexibilization in Morocco under the policy of capital account liberalization. Basing on our...

Capital Account Liberalization in Morocco: Is it Compatible with Fixed or Flexible Exchange Rate Regime?

Published Online: Jan 28, 2020

Page range: 185 - 218

Received: Oct 25, 2018

Accepted: Jan 18, 2019

DOI: https://doi.org/10.2478/jcbtp-2020-0010

Keywords
Capital account liberalization, Exchange rate regime flexibilization, compensation fund, Real exchange rate, and game theory

© 2019 Elhadj Ezzahid et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Capital Account Liberalization in Morocco: Is it Compatible with Fixed or Flexible Exchange Rate Regime?

Published Online: Jan 28, 2020

Page range: 185 - 218

Received: Oct 25, 2018

Accepted: Jan 18, 2019

DOI: https://doi.org/10.2478/jcbtp-2020-0010

KeywordsCapital account liberalization, Exchange rate regime flexibilization, compensation fund, Real exchange rate, and game theory

© 2019 Elhadj Ezzahid et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Capital account liberalization, Exchange rate regime flexibilization, compensation fund, Real exchange rate, and game theory