The Effects of Practices and Real Exchange Rate Misalignment and Economic Growth in the Maghreb Countries (Tunisia, Algeria, Morocco)
Purpose: The paper investigates the role of real exchange rate (RER) misalignment on long-run growth in three countries of the Maghreb countries (Tunisia, Algeria and Morocco) over the period 2000-2020. Design/Methodology/Approach: We first estimate equilibrium RER relying on the Fundamental Equilibrium Exchange Rate (FEER) approach, from which misalignment is derived. Second, we estimate a dynamic panel growth model in which among the traditional determinants of growth, our measure of misalignment is included. Findings: The results indicate that the coefficient for RER misalignment is negative, which means that a more depreciated (appreciated) RER helps (harms) long-run growth. Practical Implications: As a consequence, an appropriate exchange rate policy would close the gap between RER and its equilibrium level. Originality/Value: It has been approved as it is long recognized in academic and policy debates that domestic policies play an important role in explaining economic growth.