Addendum: Monetary policy instruments and price stability

Abstract

The analysis of monetary policy has always been a privileged field of research in the field of economic policy. The evolution of the institutional environment; economic, financial and social always encourages the renewal and rethinking of research in this field; one of the fields of interest at this level is the study of the effectiveness of monetary policy instruments with regard to price stability Price instability has often been the cause of many economic turbulence, generally this instability resulted from inflation. It is a phenomenon that is both disturbing and worrying and constitutes signals or rather symptoms of economic crisis. Since it weakens economic agents who become irrational, due to a high level of uncertainty, distorts the decision-making process and hinders growth. The purpose of this article is to provide some answers to a widely debated question. This is the robustness of monetary policy in terms of inflation stability. In this logic, we are particularly concerned about the effectiveness of the system currently implemented by the Moroccan central bank to ensure the objective of price stability. Inflation is represented by the consumer price index (CPI), as for the instruments of monetary policy, we have chosen in the context of this work, the key interest rate (TD), the reserve rate mandatory (RO), and money supply (M). The results obtained by Granger causality tests and the approach of cointegrated VAR models show that monetary policy instruments are cointegrated with inflation and that there is a causal effect between the money supply and inflation , the money supply and the mandatory reserves and inflation, in addition to the mandatory reserves and the key rate are explanatory of inflation in the error correction model. It can be understood from these results that the monetary policy of inflation targeting causes a change in the behavior of inflation during the period studied.

Keywords: Monetary Policy, Inflation Targeting, Instruments, Causality

JEL Classification : E31, E42, G23.

Paper type : Empirical research.