Analyzing the Dynamics of Inflation, Exchange Rates and Economic Growth through the Gini Index: Modeling VAR in Morocco

Abstract

In this study, we analyze the cross-impact of inflation, exchange rates and economic growth on income inequality in Morocco between 2000 and 2022, based on the GINI index as a measure of inequality. Its main objective is to understand how these macroeconomic variables influence income disparities. Our methodology is based on a VAR model to capture dynamic interactions between variables. To validate the robustness of the model, Granger causality tests and specification tests, including tests of homoscedasticity and autocorrelation of residuals, were used. The result is that inflation has a significant positive impact on income inequality, and exchange rate fluctuations directly influence inequality. Furthermore, economic growth helps to reduce inequality, although this effect depends on the distribution of the benefits of this growth. This study contributes to the existing literature by providing empirical evidence of the importance of macroeconomic stability and educational and fiscal policies in reducing income inequality.

Keywords

• Income Inequality, Inflation, Exchange Rate, Economic Growth, Gini Index, VAR Model