Disentangling the effects of macroeconomic policies in Morocco
A SVAR approach
DOI :
https://doi.org/10.23882/emss26295Mots-clés :
Monetary policy, fiscal policy, monetary dominance, inflation-targeting, SVARRésumé
In this research, we disentangled the effects of macroeconomic policies in Morocco under the assumption of monetary dominance. To conduct the empirical analysis, we identified a SVAR framework in which fiscal authorities are constrained by the monetary conditions stemming from central bank’s inflation-targeting policy. In light of our findings, output responds positively to expansionary fiscal policies, which tend to exert upward pressure on prices. Furthermore, the central bank seems unable to impose full monetary dominance and fails to alleviate inflationary pressures through interest rate hikes, which calls into question the effectiveness of inflation-targeting policies in Morocco. Such policies appear to constrain the growth prospects without delivering the expected effects on prices. These results highlight the need for closer coordination of monetary and fiscal authorities’ actions, backing interest rate-based monetary policy with effective money supply management and avoiding any fiscal measures that support economic growth at the expense of price stability.
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