Analysis of monetary policy transmission mechanisms in Morocco

Abstract

This article provides an empirical analysis of monetary policy transmission mechanisms in Morocco using a Vector Autoregressive (VAR) model. The study is based on quarterly data covering the period from 2005Q1 to 2023Q1, a phase marked by major reforms in the monetary policy framework and significant economic and financial transformations. The main objective is to assess the ability of monetary policy to influence both the financial and real sectors of the Moroccan economy through the identification and analysis of the main transmission channels. The empirical results highlight the predominant role of the interest rate channel in the transmission of monetary policy shocks, making it the most effective mechanism for conveying policy decisions to economic activity. The credit channel ranks second in terms of importance, reflecting the influence of banking financing conditions on investment and consumption. However, the overall impact of these two channels remains moderate, suggesting a partial transmission of monetary policy decisions to the real economy, particularly with respect to output dynamics. These findings can be explained by certain structural characteristics of the Moroccan economy, including the relative depth of the financial system, the structure of the credit market, and the behavior of economic agents. Overall, the study underscores the need to strengthen the effectiveness of monetary transmission channels to enhance the impact of monetary policy on economic growth and macroeconomic stability.