Flexibility or Fixity? Deciphering Moroccos foreign exchange regimes

This book assesses the effectiveness of Moroccos exchange rate regimes and analyses the dirhams ability to absorb external shocks. It takes a critical look at the choices made by the monetary authorities, which, although contributing significantly to exchange rate stability and mitigating the impact of external shocks, face persistent structural imbalances, such as a trade deficit, a high budget deficit and significant external debt. The analysis calls for consideration of a transition to a more flexible exchange rate regime, drawing on IMF recommendations and the experiences of other countries with similar economic characteristics. In theory, it has been shown that the exchange rate regime in place until the end of 2014 remains unsuited to developments in the Moroccan economy. Furthermore, the risks associated with greater flexibility, particularly in terms of vulnerability to economic shocks and limited diversification, appear manageable.