Test by the SVECM model of the impact of the exchange rates and foreign direct investment on the economic growth of the Maghreb region
-
DOIhttp://dx.doi.org/10.21511/ed.19(1).2020.01
-
Article InfoVolume 19 2020, Issue #1, pp. 1-14
- 682 Views
-
181 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The purpose of this article is to identify the main sources of cyclical fluctuations affecting the five Maghreb countries in a general analysis framework through the impact of the exchange rates and foreign direct investment. Besides, will consider in this study a set of variables taking into account the real monetary and fi ancial dimensions of the economies. Therefore, authors have adopted an approach in terms of the VECM Structural model and analyzed the robustness of the response functions. Indeed, the estimation results showed the existence of a regional dynamics where the respective sensitivity to change of the real exchange rate is the same. In addition, FDI and REER stimulate economic growth of the Maghreb economies in exchange for regime transmutations. In addition, the participation of FDI in the socio-economic development seems to be weak without the implementation of a policy of support and guidance aimed at reducing the catastrophic effects on the economy and reorienting its investments towards sectors with a high added value.
- Keywords
-
JEL Classification (Paper profile tab)F15, F42, F43, C32
-
References29
-
Tables4
-
Figures4
-
- Figure 1. Trend evolution of FDI per country
- Figure 2. Trend evolution of the REER per country
- Figure 3. Reaction of different shocks to foreign direct investment (FDI)
- Figure 4. Reaction of different shocks on the exchange rate (REER)
-
- Table 1. Overall descriptive analysis of basic variables
- Table 2. Unit root tests of variables in logarithm
- Table 3. Decomposition of the Variance of Foreign Direct Investment (FDI)
- Table 4. Variance Decomposition of the Real Effective Exchange Rate (REER)
-
- Bailliu, J., Lafrance, R., & Perrault, J.-F. (2001). Exchange Rate Regimes and Economic Growth in Emerging Markets. In Revisiting the Case for Flexible Exchange Rates (pp. 317-345). Proceedings of a conference held by the Bank of Canada (November 2000). Ottawa: Bank of Canada.
- Bende-Nabende, A. (2002). Foreign Direct Investment in Sub-Sahara Africa: A co-integration analysis. Economics Bulletin, 6(4), 1-19.
- Bende-Nabende, A., Ford, J. L, Santoso, B., & Sen, S. (2003). The interaction between FDI, output and the spillover variables: co-integration and VAR analyses for APEC, 1965-1999. Applied Economic Letters, 10(3), 165-172.
- Bernanke, B., & Mihov, I. (1995). Measuring Monetary Policy (NBER Working Paper, No. 5145).
- Blanchard, O. J., & Quah, D. (1989). The Dynamic Effect of Aggregate Demand and Supply Disturbances (NBER Working Paper No. 2737). American Economic Review, 79(4), 655-673.
- Burda, M., Bean, C., & Svejnar, J. (1993). Unemployment, Labour Markets and Structural Change in Eastern Europe. Economic Policy, 8(16), 101-137.
- Citu, F., & Twanddle, J. (2003). The Output Gap and it Role in Monetary Policy Decision-making. Reserve Bank of New Zealand Bulletin, 66(1).
- Dabla-Norris, E., Honda, J., Lahreche, A., & Verdier, G. (2010). FDI Flows to Low-Income Countries: Global Drivers and Growth Implica-tions (IMF Working Paper 10/132). Washington: International Monetary Fund.
- Dehejia, V. H. (2003). The choice of monetary/exchange rate regimes: Concepts and arguments (Carleton Economic Papers 03-12). Ottawa: Carleton University.
- Dehejia, V. H., & Rowe, N. (1999). Macroeconomic Stabilization: Fixed exchange rates vs inflation targeting vs price level targeting (Carleton Economic Papers 99-15). Ottawa: Carleton University.
- Engle, R. F., & Granger, C. W. J. (1987). Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55(2), 251-276.
- Frankel, J. A., & Romer, D. H. (1999). Does Trade Cause Growth? American Economic Review, 89(3), 379-399.
- Goux, J. F. (2006). La sensibilité aux chocs économiques de la zone euro. Revue d’économie politique, 116(1), 91-107.
- Hadri, K. (2000). Testing for Unit Roots in Heterogeneous Panel Data. Econometrics Journal, 3, 148-161.
- Husain, A., Mody, A., & Rogoff, K. S. (2004). Exchange Rate Regime Durability and Performance in Developing Versus Advanced Economies (NBER Working Paper, 10673).
- Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 115(1), 53-74.
- Kao, Ch. (1999). Spurious Regression and Residual-Based Tests for Cointegration in Panel Data. Journal of Econometrics, 90, 1-44.
- Kim, S. (2001). International transmission of the US monetary policy shocks: evidence from VAR’s. Journal of Monetary Economics, 48, 339-372.
- Kim, S., & Roubini, N. (2000). Exchange rate anomalies in the industrial countries: a solution with a structural VAR approach. Journal of Monetary Economics, 45(3), 561-586.
- Levin, A., Lin, C. F., & Chu, C. (2002). Unit Root Test in Panel Data: Asymptotic and Finite Sample Properties. Journal of Econometrics, 108, 1-24.
- Levy-Yeyati, E. L. E., & Sturzenegger, F. (2002). Classifying Exchange Rate Regimes: Deeds vs. Words.
- Lipsey, R. (2000). Inward FDI and Economic Growth in Developping Countries. Transnational Corporations, 9(1), 67-95
- Moon, H. R., & Perron, B. (2004). Testing for a Unit Root in Panels with Dynamic Factors. Journal of Econometrics, 122, 81-126.
- Pahlavani, M., Wilson, E., & Worthington, A. C. (2005). Trade-GDP Nexus in Iran: An Application of Autoregressive Distributed Lag (ARDL) Model. American Journal of Applied Sciences, 2(7), 1158-1165.
- Peersman, G., & Smets, F. (2001). The Monetary Transmission Mechanism in the Euro Area: More Evidence from VAR Analysis (ECB Working Paper No. 91). Cambridge: Cambridge Univer.
- Reinhart, C., & Rogoff, K. (2004). The Modern History of Exchange Rate Arrangements: A Reinterpretation. The Quarterly Journal of Economics, 119(1), 1-48.
- Selmi, R., Bouoiyour, J., & Miftah, A. (2016). What Mitigates Economic Growth Volatility in Morocco?: Remittances or FDI. Journal of Economic Integration, 31(1), 65-102.
- Sims, C., & Zha, T. (1998). Bayesian Methods for Dynamic Multivariate Models. International Economic Review, 39(4), 949-968.
- Xu, Z. (2000). Financial Development, Investment, and Economic Growth. Economic Inquiry, 38(2), 331-344.