ARDL modeling and analysis of the impact of the interaction between the exchange rate and inflation on economic growth in Morocco

Abstract

The effect of exchange rate and inflation variables on macroeconomic performance, particularly economic growth, is a contentious topic for countries' macroeconomic policies. In this study, we aim to examine the impact of the interaction between the exchange rate and inflation on economic growth in Morocco. To accomplish this, we employ an autoregressive distributed lag model (ARDL) to test the influence of this interaction, examining data from the years 1989 to 2019. Our findings indicate that short-term economic growth is significantly affected by the interaction between the exchange rate and inflation (Pass-Through) when lagged in first difference. However, in the long-term, results suggest that economic growth need not be reliant on both exchange rate and inflation.