Pass-through analysis of key rates on bank interest rates in Morocco

Abstract

Understanding transmissions is one of the pillars of developing a modern and effective monetary policy, as this enables monetary authorities to assimilate the way in which monetary decisions influence the economy, in order to determine the instruments to be mobilized in order to be able to steer the economy in the desired direction.

This understanding is closely related to the analysis of the transmission of the interest rate, since it is the traditional channel among the various channels of monetary transmission. It is an important tool in monetary decision-making to achieve effective conduct of monetary policy.

The objective of this article is to analyze, for the Moroccan case, the transmission of key interest rates on lending interest rates, in order to identify and quantify the impact of monetary decisions aimed at financing the economy through the banking system on interest rates on bank loans.

The estimate of the pass-through of key interest rates on bank interest rates was based on an ARDL modeling and covered data on a quarterly frequency covering the period 2007-2021. This data relate to the Weighted Average Rate of the Interbank Market (TMP) and the Average Debit Rate (TDM).

The results obtained lead us to suggest that the pass-through in Morocco is incomplete in the short term. That is, the transmission of monetary policy decisions through the interest rate channel remains limited.

While in the long term, it is significant and comprehensive, which means that the decisions of the monetary authorities in Morocco, via the interest rate channel, require more time for the banks to adjust their interest rates and to those businesses and households can feel the effect of these decisions.

Classification JEL : C32, E44, E52, G20

Paper Type : Empirical Research