Testing the Marshall-Lehner condition in the success of the policy of devaluing the local currency in addressing the trade deficit (applied to the Moroccan economy 1990-2025)

Abstract

This study aims to test whether the Marshall-Lerner condition is satisfied within the Moroccan economy, which states that currency devaluation addresses the Moroccan trade deficit if the sum of the demand elasticities for Moroccan imports and exports is greater than one. By collecting annual data on the study variables for a period covering (1990-2025) and using the Autoregressive Lag Delayed (ARDL) methodology and bounds testing to study the cointegration relationship between the variables in the long run, and the error correction model to study the relationship in the short run, and by estimating the price elasticity of demand for imports and the price elasticity of demand for exports separately, as well as the trade balance elasticity to changes in the exchange rate, the results of the three equations in the long and short run showed that the Marshall-Lerner condition is not met in the Moroccan economy, which means that the devaluation of the Moroccan currency against the US dollar will not lead to an improvement in the Moroccan trade balance.