Morocco's Economic Growth and Real Effective Exchange Rate Volatility: A Quantile Reestimation with Regressor Correction
Description
This paper investigates the quantile effects of real effective exchange rate volatility on economic growth in Morocco. The results show no significant average effect using a GARCH(1,1)-based volatility measure and a quantile autoregressive distributed lag model with quarterly data for 2007Q1-2021Q4. But the quantile estimates show real heterogeneity, with the coefficient of volatility going from -0.029 at the 10th percentile to +0.029 at the 90th. We show that correcting for the generated regressor triples the standard errors and that long-run elasticities remain unidentified. The only strong element left is the speed of adjustment, which decreases from −0.484 to −0.242 over the distribution. These results caution against inferential practices in applied quantile literature that do not take this correction into account.
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Institutions
- Mohamed I UniversityOriental, Oujda