Analysis of the Influence of the Exchange Rate Reform and COVID-19 on the Real Exchange Rate of the Dirham using the BEER Methodology: Case of Morocco

Abstract

Abstract This article assesses the deviation of Morocco's real effective exchange rate (REER) from its equilibrium, in the wake of the reform of the exchange rate regime and the COVID-19 crisis. Adopting the BEER approach, we examine the evolution of the dirham and discern the internal and external factors influencing its deviation. After elucidating the concept of the equilibrium rate, we detail the methodology employed. Our conclusions reveal the notable impact of the 2018 reform on the REER, marked by the widening of the dirham's fluctuation band, inducing a significant depreciation. In addition, the pandemic has accentuated economic vulnerability, with a recession of -7.2% in 2020. In short, economic equilibrium is essential if Morocco is to face up to the challenges that lie ahead. Competitiveness indicators must be rigorously monitored to guarantee Morocco's competitive position internationally. Keywords: Real effective exchange rate; Equilibrium rate; BEER approach; Exchange rate regime reform; COVID-19.