Abstract
The purpose of this article was to explain the asymmetry of real effective exchange rate (REER) impact on economic growth for the Arab Maghreb Union during the period 1980-2019. This work sought to measure the adjustment rate of the exchange rate policy towards its equilibrium levels, justifying the use of nonlinear modelling. The complexity of the exchange rate dynamics has led to the application of the Panel Threshold Regression Model to test the hypothesis testifying for its effect on domestic economic growth. The empirical results reveal that the REER shows opposite effects below and over the estimated threshold. This highlights the asymmetrical effect of unforeseen shocks on its volatility.
 JEL Classification: C33; F31; F43; O55; O57
Highlights
The globalisation of the economy and integration into the world market have reduced the isolation of the Maghreb economies from the developed economies since the 1990s
We chose to study the dynamics of the real effective exchange rate (REER) of the Maghreb countries in a framework of nonlinear models with a sudden transition
The brutal change approach Panel Threshold Regression (PTR) developed by Hansen (1999), showed us that the REER has significant non-linear effects on economic growth in the different studied countries
Summary
The globalisation of the economy and integration into the world market have reduced the isolation of the Maghreb economies from the developed economies since the 1990s. Developing economies are increasingly exposed to positive or negative externalities from European economies. The global integration of the Maghreb countries into this trade has made it possible to absorb these global shocks, such as the rise in oil prices from 2004 onwards, reducing the negative effects on growth. The existence of structural gaps, differences in the endowment of raw materials, human capital and the capacity for the diffusion and absorption of technologies between the five countries of the Arab Maghreb Union (AMU) (Morocco, Algeria, Tunisia, Libya and Mauritania), produces differentiated effects on bilateral trade and economic growth. It is legitimate to ask how does exchange rate variability affect economic growth for the Maghreb countries as a whole?
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