Impact of the misalignments of exchange rate on the
Moroccan competitiveness
Mohamed BOUZAHZAH
Mohammed V University, FSJES Salé, Morocco
Al Makrizi Institut d’Economie, Rabat, Morocco
Radouane BACHAR
Mohammed V University, FSJES Rabat, Morocco
Abstract:
The competitiveness of Moroccan business achieved against underperformance in
recent years. The exchange rate has often been questioned, due to its location by the
monetary authorities and its peg to a basket of currencies. In this paper, we evaluate the
effects of misalignment of the real effective exchange rate on the competitiveness of
Moroccan firms for the period 1980 to 2012. For this purpose, we first serve a vector
correction model error in order to estimate the real equilibrium exchange rate based on
the exchange rate equilibrium behavioral approach, which allows us to determine
misalignments. Then we design a global competitiveness index for Moroccan
companies. Finally we use the GMM method of Panel to estimate a reduced equation
including traditional determinants of competitiveness, to which we add misalignments
concerned. Our results show that misalignments act negatively on competitiveness,
including the situation of overvaluation. However, situations of undervaluation penalize
also competitiveness but less dramatically.
Key words: Misalignment, Exchange rate, Competitiveness, instrumental variables, Panel GMM.
Jel classification: C23, C26, F31
Introduction
A real exchange rate which in a general way is aligned on its equilibrium value constitutes a
significant component of the macroeconomic framework and external competitiveness of any
country. If real exchange rates know a persistent misalignment, they can involve a bad allocation of
resources between the sector of the exchangeable goods and that of the nonexchangeable goods, as
well as a negative impact on the dynamics of the job market.
The reduction of external competitiveness due to the overestimated exchange rates slows
down exports, the total request, the growth and job creation. In addition to the longer-term
implications, the misalignment of real exchange rate can involve inflationary pressures and even start
speculative attacks. During the fixing of their policies of exchange, the countries must also
equilibrate their objectives in relation with competitiveness and macroeconomic stability.
In Morocco, the questions of misalignment of real exchange rates arose during a certain time,
because of the unemployment rate raised in this country, of the stagnation of its shares of the world
exports and the weak diversification of its exports. External competitiveness became more relevant
because of the world financial crisis and the shortly after risings of 2011, the inclusive growth and
job creation again occupying the first place in the economic diary this country. By giving exact
signals to the producers, real exchange rate can help to create competitive jobs thanks to exports. It
can also help to reduce certain inequalities, by increasing the marginal output of the workers. To be
effective, aligned, real exchange rate must be supplemented by other healthy macroeconomic
policies and a favorable commercial environment.
In this paper, we evaluate the effects of the misalignments of real effective exchange rate on
the competitiveness of the Moroccan companies, for the period going from 1980 to 2012. For that,
we make use initially of a vectorial model with correction of error to consider the exchange rate real
of balance starting from the approach known as behavioral of the exchange rate of balance and to
determine the misalignments. We make then a total index of competitiveness for the Moroccan
companies. We use finally the method of the generalized moments in Panel to consider an equation
reduced of competitiveness including the traditional determinants of the competitiveness, to which
we add the given misalignments.
The first part of the paper is devoted to the determination of the misalignments. The second
part estimates then the index total of competitiveness. The third part is dedicated to the evaluation
of the impact of the misalignments on competitiveness.
1
1.1.
Determination of the misalignments
Adopted approach
In the economic literature, the analyses carried out on the equilibrium real exchange rate are based
on two distinct theoretical approaches: approach known as fundamental (Williamson, 1994) and
approach known as behavioral (Clark and MacDonald, 1998).
The fundamental approach is used for a goal of macroeconomic policy and insists on the
components of economic policy which influence the short-term’s variations of real exchange rate.
The behavioral approach, on the other hand, has a secondary utility for the economic policy
and insists on the macroeconomic determinants of long run of real exchange rate. This approach
does not seek to determine the level of the equilibrium real exchange rate compatible with external
and internal balances, but the determinants of long run of real exchange rate.
In this paper, the estimate of the equilibrium real exchange rate is done in reference to the
approach known as “behavioral” since our objective is to determine the macroeconomic variables
likely to influence real exchange rate in the long run for Morocco.
In this respect, the basic model takes as a starting point the work by Emre and al. (2000)1,
where the simultaneous balance of the current balance and the market of the nonexchangeable
goods is carried out.
1
This model falls under the line of work of Edwards (1993).
2
The equilibrium exchange rate is given as being the relative price which ensures at the same
time external balance and the domestic equilibrium. One can as follows define it in function 2 :
𝑒 ∗ = 𝑒 ∗ (𝑇𝑜𝑡, 𝑇𝑜𝑢𝑣, 𝐷𝑥𝑝, 𝐹𝑏𝑐𝑓, 𝐶𝑟𝑝𝑖𝑏, 𝐷𝑝)
The equilibrium level of the real exchange rate is based on the terms of trade (𝑇𝑜𝑡), the rate of
opening (𝑇𝑜𝑢𝑣), the public foreign debt (𝐷𝑥𝑝), the Gross fixed capital formation (𝐹𝑏𝑐𝑓), the
growth rate of the GDP (𝐶𝑟𝑝𝑖𝑏) and the public expenditure (𝐷𝑝). The Variables in the equation are
the fundamentals of the real exchange rate equilibrium long time.
The variables3 (𝑇𝑜𝑡), (𝑇𝑜𝑢𝑣) and (𝐶𝑟𝑝𝑖𝑏) are expressed as a percentage. The other variables
are expressed in logarithms.
1.2.
The econometric approach and results
On the basis by what precedes, we use the technique of Johansen (1995) not only to test the
existence of at least a relation of the long-term (or cointegration) between the variables, but also to
carry out an estimate of the exchange rate of behavioral balance (BEER). The advantage of this
technique compared with the others, in particular that of Engle and Granger (1987), is that it makes
it possible to determine the existence of several relations of cointegration.
The test of cointegration indicates the presence of two relations of cointegration. We can thus
estimate the VCEM. The value of the trace of 341.30 > 197.30 rejects the assumption of the
existence of to more the zero vector with 95% and accepts the alternative assumption which there
exists at least a coïntégrant vector. The relation of long run between real exchange rate and the
fundamental significant ones for the model can be expressed on the table below:
Table 1: Relation of long run between real exchange rate and the fundamental ones
TCER
1
t-stat
LTOT
0,74
4,182
LFBCF
0,50
6,169
LDP
-1,93
-11,995
LDXP
0,40
12,989
CRPIB
0,16
20,042
TOUV
0,02
6,737
The six variables playing the role of fundamentals of the economy are good sign and
statistically significant. The other variables are statistically insignificant; they were rejected by the
model. It is the ratio of direct foreign investments and the trade balance to GDP ratio value.
Empirically, improved terms of external trade (an increase of TOT), causes an appreciation of
the ERER. So, the income effect outweighs the substitution effect. Regarding the coefficient of the
variable differential growth (productivity indicator measuring the Balassa-Samuelson effect) shows
that more growth is increasing in Morocco compared with its partners over the real exchange rate
appreciates. This is the effect Product augmenting dominates.
From the estimated long-term relationship, it is possible to calculate the relative difference
existing between the observed real exchange rate and balance; we get a measure of actual current
misalignment. This can be measured by the following formula:
𝛺 = 𝐸 − 𝐸∗,
with 𝛺, E and E* represent the misalignment indicator, the real exchange rate and the observed
equilibrium real exchange rate.
According to the formula of the indicator misalignment, three scenarios are possible:
(i) if 𝛺 is positive, the real exchange rate is overvalued;
(ii) if 𝛺 is negative, the real exchange rate is undervalued;
The equation of the exchange rate of balance was inspired by the basic model of Emre and al. (2000) and was
developed by the authors of this article in a model specific to the Moroccan economy.
3
Data sources: Finance Minister, HCP, the World Bank and the Base SLAM built and put at day by the CEPII, Paris.
2
3
(iii) if 𝛺 is zero the real exchange rate is aligned.
The application of this formula allows us to deduce the following misalignments of the real
exchange rate of the Moroccan dirham:
Figure 1: Misalignments of the real exchange rate of the Moroccan dirham 1980/2012
7
6
5
4
3
2
1
0
-1 1980
-2
-3
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
As calculated using the Beveridge and Nelson method, overvaluation lasted for four years
from 1980, but its magnitude is small and its maximum is reached on the eve of the adoption of the
Structural Adjustment Program (1983). During this period, the active exchange rate policy of the
Moroccan authorities has led to a gradual depreciation of the dirham, which is taken over a relatively
stable period from 1987 to mid- 1990.
During this phase, the nominal effective appreciation of the dirham over 13 % was somewhat
more than offset by the slight increase in the index of cost of living relative to the partner countries.
However, due to the deterioration of terms of trade during the period 1987-1989 that caused a
worsening of the trade deficit , the Moroccan authorities decided in May 1990 to devalue the dirham
9.25% to further support the competitiveness the export and improve the profile of the balance of
payments sector.
The period from the 1990s to the end of 2000 has been marked by alternating periods of
undervaluation and overvaluation and monetary authorities did not intervene to change the value of
the dirham except consolidation currency area Euro in early 1999 with the introduction of the single
European currency which allowed Dirham reach its equilibrium value in 1999 (MIS = 0.04).
In that date a period of undervaluation persisted (especially with the redevelopment of the
basket of currencies in 2001) until the end of 2010 where Dirham began to wrap around its
equilibrium value (when it deviates slightly as shown by calculating the misalignment, a restoring
force him back to the estimated value), although in 2012 a slight undervaluation returns (about
10%), which allows to note that the deviations exchange rate of the dirham from its equilibrium
value have a persistent character (persistent overvaluation in the 1980s and persistent undervaluation
of 10 years ranging from 2000 to 2012).
2.
Estimate of the Total Index of Competitiveness (IGC)
In this paper, it was retained a Compound index of competitiveness estimated starting from a certain
number of reflected supposed indicators the level of competitiveness of the Moroccan companies,
in comparison with other countries on levels of development comparable, in fact Algeria, Tunisia
and Egypt. With these countries Turkey and France are added.
2.1.
Formulation of the indicator
The compound index evaluated by this work will take into account influencing whole of the
elements directly or the indirectly the competitiveness of Moroccan exports, while being based on
4
the one hand on the determinants of international competitiveness4 and on the other hand, on
specific factors to the Moroccan economy. The variables retained in the study are the following5 :
- Share of the Customs duties in the importations of goods and services (% DD in the
imports): indicator of competitiveness price giving an idea on the nature of the trade policy of
Morocco;
- The growth rate of GDP (CRPIB): indicator of competitiveness price collecting the effect of
productivity of the factors of production; Gross fixed capital formation in % of GDP (GFCF in %
of the GDP): indicator of structural competitiveness, it makes it possible to measure the effort of
investment constitutes a determining factor in the creation of dynamic comparative advantages and
the collecting of phenomena of economies of scale and increasing outputs;
- Flow of Direct foreign investments (IDE): indicator of structural competitiveness, giving an
idea on the potential of attractivity of the country;
- Index of Human development (IDH): indicator of structural competitiveness, to introduce
the level of the country as regards development of its human capital; Total public expenditure in
Education in % of GDP (DPE in % of the GDP): variable of control to collect the effort
authorized by the country for the formation;
- Index of Structural reforms (IREF): variable proxy used to take account the whole of the
reforms introduced since 1980 and which they have a direct impact on competitiveness (adoption of
a binary system (0.1)).
After having determined the various factors entering the composition of the index, it any
more but does not remain us to incorporate the variables used in one composite indicator which has
the property to be a good summary of information contained in these variables and to then estimate
the weighting coefficients of our indicator.
2.2.
Determination of the weighting coefficients
The values resulting from the determination of these coefficients will allow the effective calculation
of our indicator for year of study. It should already be admitted that there exist several methods of
determination of these coefficients. These various methods can be classified in two groups: methods
based on the facts and those based on the opinion or the choice of the user.
The method adopted by this work is that based on the facts. It is indeed the technique of the
Analysis of the principal component (ACP) which is employed for the construction of the
compound index of competitiveness suggested by this article.
The new index of competitiveness proposed by this study is built starting from the first
component of the data analysis. This only variable is used to summarize the totality of information
of the original matrix. The following table shows that this first axis explains 56.64% of the original
variance of the sample for the period, which fully justifies the use of this only component for the
construction of the index.
Component
1
2
3
4
5
Table 3: Explained original variance (method of extraction of the ACP)
Initial eigen values
Somme of the squares of the factors retained
for rotation
Total
% of the
Cumulated
Total
% of the
Cumulated
variance
%
variance
%
3,965
56,644
56,644
3,964
56,626
56,626
1,116
15,942
72,586
1,117
15,959
72,586
0,926
13,223
85,809
0,424
6,058
91,867
0,309
4,410
96,277
Determinants developed by the World economic forum and the international institution of Management which adopt
economic indicators based on the effectiveness of the productive apparatus and the quality of the institutions
5
The statistical data relative to these variables, for the whole of the countries of the model, are extracted from the
databases of the UNCTAD and EUROSTAT
4
5
6
7
0,202
0,059
2,880
0,843
99,157
100,00
The compound index of competitiveness is calculated starting from a linear transformation of
the old variables. To have the best possible representation of the matrix of the data, the weighting
coefficients of each variable are estimated in order to maximize the variance of the first component,
the sum of their squares being forced to equalize the unit. The weighting coefficients and the
explanatory power of the variance of the first component are in the table below.
Variables
Weighting
coefficients (The
first
component)6
Explanatory
power
Table 4: Weighting coefficients of the Index of Competitiveness
FBCF/GDP DPE/GDP
IDH
DD/IMPORTS
IDE
CRPIB
IREF
0,959
0,815
0,924
-0,874
0,861
0,109
0,102
56,6%
56,6%
56,6%
56,6%
56,6%
56,6%
56,6%
In spite of the distance of the unit, the high quantity of selected variables and their
heterogeneity fully justify the use of this component alone for the condensation of information and
the construction of the index, without the loss of information being significant.
The application of the ACP method made it possible to calculate a compound index whose
trend of evolution can be expressed as follows:
Figure 2: Evolution of the total index of competitiveness for Morocco
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
1980
1985
1990
1995
2000
2005
2010
By construction, a superscript than 0.10 brand of period of profit in terms of competitiveness.
On the other hand, an Index of competitiveness lower than this value marks periods of undercompetitiveness of the Moroccan economy.
The analysis shows that the periods of under-competitiveness are characterized by a low level
of economic growth due to the low productivity of the factors of production as well as a low
volume of the direct foreign investments.
Moreover, it was noted that the GFCF has a significant positive effect on competitiveness;
thus the effort of investment authorized by Morocco these last years has positive consequences on
the potential of performance of the Moroccan companies.
The coefficients released by this study will be used for the estimate of the Indices of
competitiveness of the other countries retained by the model.
The trend of evolution of these indices in comparison with the Moroccan case can be
expressed on the graph hereafter:
6
The sum of the squares of the weighting coefficients is equal to the unit. The power of explanation indicates the share
of the original variance explained by the first component.
6
Figure 3: Evolution of the Indices of competitiveness per country
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
-0.05
-0.10
Morocco
Algeria
Tunisia
Turkey
France
Thus, such as it arises from the graph above presented, the Moroccan economy remains less
competitive compared to the other economies of the sample because in particular of the low level of
productivity and the technological lack of intensity in the Moroccan products intended for the world
export. Nevertheless, the above mentioned graph makes it possible to note that Morocco regained
in terms of competitiveness during these last decades, which enabled him to do better than Algeria,
country whose level of competitiveness started to be degraded as from the year 2008.
Finally let us underline that the results of this analysis are in conformity with the estimates
carried out by other studies, in fact those published by the world economic forum and the world
institution of Management.
3 Measurement of the effects of the misalignments on competitiveness
The purpose of the analysis here is to determine the impact of the misalignments on
competitiveness. For this purpose, we will present initially the model and the justifications of the
econometric method used, then tests and the results.
3.1. Presentation of the model and justification of the method of estimate.
For needs for clearness, we will make this presentation in a distinct way.
Presentation of the model
The relation of determination of competitiveness is inspired by the economic literature, in particular
model founder of Armington (1969). It is given by the following equation:
Δ𝐼𝐶𝑖,𝑡 = 𝛽0 + 𝛽1 𝐼𝐶𝑖,𝑡−1 + 𝛽2 𝑀𝐼𝑆𝑖,𝑡 + 𝛽3 𝑍𝑖,𝑡 + 𝑢𝑖,𝑡
(1)
with 𝐼𝐶 the total index of competitiveness, 𝑀𝐼𝑆 the Misalignments of the real exchange rate, 𝑍
traditional determinants of competitiveness represented by the variables 𝐶𝐵 the pay of the trade
balance, 𝐶𝑃𝐼 the price index with consumption, 𝑇𝑂𝑇 : Terms of trade, 𝑇𝑂𝑈𝑉 the rate of opening
7
and 𝐺𝐷 rate of the 𝐺𝐷𝑃. Concerning the variable 𝜇𝑖,𝑡 , it constitutes the term of error of the
equation of reference.
The classical empirical literature bases, often, its analysis on the price differences to study the
evolution of the commercial performances of the countries (Gaulier et al., 2002; Bessone and Heitz,
2005; Deruennes, 2006; ECB, 2006; Artus and Fontagné, 2006). Indeed, with more short-term, the
competitiveness of a country is expressed mainly by the evolution of its relative prices (CEPII,
1998).
However, the increase in the world market shares of a given national industry will result at the
same time from the economic situation in the countries the closest partners and from its
competitiveness-price. That means that the competitiveness of a country will be more or less strong
according to the dynamism by product of the international request. Thus, according to these
classical studies, the export trends of a country will depend on the world demand which is addressed
to him and its competitiveness-price on the worldwide market. These empirical studies are derived
from the model founder of Armington (1969).
Of our share, we insisted in our model on the variables which reflect competitiveness price by
country (price index with consumption and the terms of trade), by adding variables in matter
structural like the productivity (measured by the growth rate of the GDP) and the rate of opening.
It is important to note that all the variables considered in the equation are expressed in
percentages except for the pay of the trade balance and the series of the misalignments, which
comprise negative values. Moreover, the equation is refined by the taking into account of the nature
of the misalignment (overvaluation or undervaluation) and of the width of this one in the
determination of competitiveness. Thus, the misalignment is broken up respectively into noted
undervaluation “Under”, and into noted overvaluation “Over”. This decomposition itself is
introduced into the equation instead of the variable misalignment (put), through an indicating
variable 𝐷𝑡 , which in the case of takes value 1 an overvaluation and value 0 if not. Thus, we define
the two new variables in the following way:
𝑂𝑣𝑒𝑟(𝑡) = 𝑀𝑖𝑠(𝑡) × 𝐷(𝑡) and
𝑈𝑛𝑑𝑒𝑟(𝑡) = 𝑀𝑖𝑠(𝑡) × (1 − 𝐷(𝑡))
The new equation obtained is written then:
Δ𝐼𝐶𝑖,𝑡 = 𝛽0′ + 𝛽1′ 𝐼𝐶𝑖,𝑡−1 + 𝛽2′ 𝑀𝐼𝑆𝑖,𝑡 + 𝛽3′ 𝑍𝑖,𝑡 + 𝑢𝑖,𝑡
(2)
Let us specify that the variable Over (respectively Under) takes a positive value in the case of
(respectively negative) an overvaluation (respectively undervaluation) of the TCER, and takes value
0 if not.
Justification of the estimation method
The technique employed for the estimate of the equations (1) and (2) is the method of generalized
moments (GMM) of Hansen (1982), because owing to the fact that the problem of endogeneity is
typical estimates of competitiveness. It is a method indicated to obtain reliable estimators if this
difficulty of endogeneity between explanatory variables arises.
Let us recall that such a problem appears when an explanatory variable is correlated with the
term of error and can, consequently, being regarded as an endogenous variable, in particular when
the dependent variable causes at least one of the explanatory variables, or that an important
explanatory variable is omitted in the model, or when one or more explanatory variables are prone
to errors of measurement.
In this case, the presence of some explanatory variables as a component of the Index of
competitiveness (variable endogenous) led to make the assumption of endogeneity of at least one of
the explanatory variables. Consequently, the estimator of least squares is not reliable. The GMM
makes it possible to mitigate this problem while proposing to define a vector of observable
instrumental variables which is strongly correlated with the vector of the explanatory variables, but
which is independent of the term of error.
8
The data of panel have the advantage simultaneously of giving an account of the dynamics of
the behaviors and their possible heterogeneity, which is not possible with the time series. They also
make it possible to reduce the risks of multicollinearity of the model, to collect effects of short and
long run and to reduce the skew of estimate of the coefficients. Lastly, the use of data of panel
makes it possible to identify the effect associated with each individual, i.e. an effect which does not
vary in time but from one individual to another.
We can suspect of the problems of endogeneity on the level of the estimating equation
involved in a causality of the exogenous variables (more particularly of the variable of the trade
balance) towards the dependent variable (competitiveness). Therefore, the econometric methods
traditional like (OLS, fixed effect and least square quasi-generalized) do not enable us to obtain
efficient estimates of such a model. Then, to solve this problem, we will set up the method of the
moments generalized on panel (GMM) proposed by Arellano and Bond (1991), and developed later
by Arellano and Bover (1995) and Blundell and Bond (1998). According to the defenders of this
method, it makes it possible to bring solutions to the problems of skew of simultaneity, of causality
reverses (especially between competitiveness and the trade balance) and of the possible omitted
variables. Moreover, it controls the individual and temporal specific effects.
Indeed, the method of (GMM) makes it possible to solve the problem of endogeneity not only
on the level of the variable of the trade balance, but also on the level of the other explanatory
variables by the use of a series of instrumental variables generated by the delays of the variables.
Moreover, it should be added that the method of (GMM) on panel has another advantage, it
generates the instruments starting from the explanatory variables; what is not the case of the other
traditional methods of instrumental variables like (2SLS and 3SLS), which require the theoretical
choice of variable instrumental correlated with the explanatory variables and not correlated with the
residue, which is difficult to find.
The installation of the method of the GMM is carried out by using procedure (XTABOND)7
on software (STATA). The model will be estimated by the method of the moments generalized in
system and two stages. With an aim of choosing the best specification of model, we examined
several specifications according to various assumptions concerning the endogeneity of the variables.
The studied panel will consist of 5 countries of which Morocco. It is Algeria, Tunisia, Turkey
and Egypt, country on comparable levels of development. Besides France, principal business
partners of Morocco.
3.2.
Tests and results
We carry out initially the unit tests of roots of Dickey-Fuller (1981) and Philips-Perron (1988) in
order to test the unit presence of root in the data used. With regard to the data, we use the pay of
the trade balance, the price index with consumption, the Terms of trade, the rate of opening and the
growth rate of the GDP. the database is extracted from the website of World Bank and the IMF.
Table 1 having the results (see in appendix) shows that the PP test does not confirm the
results of test ADF relating to the variable IC (- 1), which indicates that the variable IC (- 1) is
stationary of difference first.
We carry out then the test of the assumption of endogeneity previously clarified. The test
largely used for this purpose is that of Hausman (1978), itself improved by Davidson and Mac
Kinnon (1993). The improved version proposes to carry out it using two regressions, as we do it
here. Firstly, we regress the suspect variable (CB) on the whole of the other explanatory variables
and instrumental (we use like instruments the delayed values of the exogenous variables retained by
the model), so as to extract the residues then. Secondly, these residues are included in the second
equation, which is that we seek to estimate (equation 2). The test provides that, if the affected
coefficient with the residues of the first equation is significantly different from zero, then one
cannot reject the assumption of endogeneity.
The results of the test of the assumption of endogeneity of variable “CB” are presented in
table 2 appear as an appendice. According to the results got at the second phase of the test, it
7
For more details, see Roodman, D. (2006).
9
appears that the residue of the first stage is significantly different from zero, which means that one
cannot reject the assumption of endogeneity of at least one of the explanatory variables. So it is well
justified to resort to method GMM to estimate our equations.
Lastly, following the estimate of equations 1 and 2, we apply the test of Sargan (1958) on the
basis of J - statistic resulting from the various estimates. This last makes it possible to test onidentification of the constraints of orthogonality, which means that the instruments are suitable (or
that they are not correlated with the term of error). Under the worthless assumption of onidentification, the statistics of test follow a distribution of chi 2 of which the degree of freedom is
equal to the number of on-identified constraints. The results of this test are consigned in table 3
appear also in appendix.
The result of the test confirms that the two models selected were correctly specified (with the
threshold of 5%) since the calculated statistics all are lower than the tabulated values of the law of
Chi 2 respectively to 9 and 12 degrees of freedom.
The tests carried out thus consolidate our econometric analysis and justify consequently that
one can interpret it.
It follows for equations 1 and the 2 results presented to table I. the main result which emerges
is that the misalignments have a negative impact and significant on the competitiveness of the
companies to the countries of the sample. It shows moreover that this negative impact is
accentuated more in the situations of overvaluation.
Variables
ΔIC(-1)
GD
TOT
TOUV
CB
MIS
Over
Under
CPI
Constant
J-Statistic
Table 5: Results of the estimates
Equation 1
0.131831**
[2.730407]
0.250321
[0.949272]
0.054265
[0.758262]
0.095409*
[6.944872]
0.103115**
[2.708698]
-0.317658*
[-6.425641]
-------------------------------------------------0.000556
[-0.859248]
-0.033309
[-1.535432]
0.179970
Equation 2
0.375903**
[4.562883]
0.119275
[0.533627]
0.013525
[0.583275]
0.067434*
[6.003060]
0.025123***
[1.780631]
-------------------------0.47841
[-7.263991]
0.173265
[2.656966]
0.000757*
[3.599709]
0.000757
[3.599709]
0.185371
The values between hooks represent t of Student.
*, ** and *** indicate respectively significativity with 1%,5% and 10%.
This table shows indeed that generally, a misalignment of 10% generates a reduction in the
competitiveness of 3.2%. Moreover, the results got for equation 2 do not confirm the theory
according to which the undervaluation supports the competitiveness and which only overvaluation
is harmful for him. They show indeed that an overvaluation of 10% armature a reduction in
competitiveness of about 4.8%, and that of a the same undervaluation amplitude generates a
reduction of 1.7% of this one (the Under variable being negative by construction). In other words,
10
the negative impact of the misalignment on competitiveness increases with the extent of the
misalignment.
With regard to the “traditional” explanatory variables said, the got results show that the
delayed value of the level of competitiveness as well as the growth rate of the economy has a
positive impact and significant on the total competitiveness of the countries, which corroborates
with the economic theory and the empirical literature on the matter which consider that the level of
competitiveness is closely related to the capacity to produce of the country.
The got results also show that the terms of trade have a nonsignificant impact on economic
competitiveness. In the same way, the rate of opening and the trading position support economic
competitiveness in accordance with the predictions of the models of foreign trade. However, the
coefficient associated with the variable balances commercial is not significant in the second estimate.
As for inflation, the first estimate reveals that it has a nonsignificant impact on competitiveness,
while the second estimate reveals on the other hand that it has a positive impact and significant. This
result lets think that the price changes act differently on competitiveness according to the sign of the
misalignment.
Conclusion
The objective of this work was to determine the effects of the misalignments of real exchange rate
on the competitiveness of the Moroccan companies, in an international context marked by an
increased growth of economic and financial flows. The principal got result is that the TCER deviates
from its level of balance on the whole of the period considered which generates negative effects on
competitiveness, with an incidence contrasted according to the situations of overvaluation or
undervaluation. In other words, the misalignments act negatively on competitiveness, in particular
the situations of overvaluation. However, the situations of undervaluation penalize they-also to it
competitiveness but in a less important way.
According to the lesson of the economic theory, an underestimated TCER, as it is the case for
Morocco, should increase the level of competitiveness, through in particular the evolution of the
foreign trade (Edwards (1988), Cottani, and al. (1990) and Ghura and Grennes (1993). However,
according to the official sources, the competitiveness of the Moroccan companies remains weak,
with a structurally overdrawn commercial balance. This lets think that the productive system of the
economy is not in order to answer the foreign request for national goods related to the
undervaluation of the currency, and that the structural economic policies remain in this respect
perfectible
11
APPENDICES
Table 1- Unit tests of roots
Test of increased Dickey-Fuller
Variables in
level
Constant
and Trend
t-statistics
Constant
t-statistics
Test of Phillips-Perron
Without
Trend and
constant
t-statistics
Constant
and Trend
t-statistics
Constant
t-statistics
Without
Trend and
constant
t-statistics
GD
-3.362
----
----
-0.254
-1.235
-2.452
IC -1
-2.859
-3.265
----
-1.254
-2.536
----
PCI
-4.805
-3.478
----
-4.312
-1.245
-0.471
Mis
-3.736
-4.452
-4.235
-3.214
-3.245
----
Under
-4.127
-4.569
-----
-2.315
-0.745
-1.254
Over
-3.256
-3.524
-3.254
-4.002
-5.003
-4.528
Variables of first Differences
Variables of first Differences
ΔIC
-4.265
----
----
-3.021
-2.154
-2.145
ΔIC -1
-----
-----
-----
-3.124
-1.236
-2.265
ΔCB
-3.452
-4.658
-4.475
-4.256
-4.254
-3.658
ΔTOUV
-5.245
-5.632
-5.024
-5.012
-5.326
-4.254
Table 2- Hausman test of endogeneity
Endogenous variable (Δ CB)
Coefficient
t-statistics
Probability
Residues of the first equation
1.01200
17.65213
0.000
Table 3 - Test of on-identification of Sargan
calculated
Statistics
Chi 2
Probability
12
Equation 1
Equation 2
5.2192
5.3757
16.919
21.026
0.81481
0.99664
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