The determinants of inflation targeting in Morocco in a context of gradual flexibilization of the exchange rate regime

Abstract

Inflation targeting is no longer to be presented as it has proven its benefits both in industrial countries and emerging economies.

It’s been three decades since its first adoption by New Zealand. This pioneer has been followed by several industrial economies: Canada, the United Kingdom, Australia, Sweden, and Norway, in addition to emerging markets such as Israel, Chile, the Czech Republic, Poland, and more recently, South Africa, Ghana, Tanzania, and many others.

We shall also point out that no inflation targeters gave upon this monetary policy strategy once officially announced its involvement in this process, except for Spain and Finland which did in order to join the European monetary Union.

Morocco, as part of its strategic orientations, has announced its gradual and long-term commitment to this new monetary policy framework since 2005-2006.

Faced with a prolonged sovereign debt crisis, followed by a health crisis, a war in Ukraine, a geopolitical crisis, and then an energy and health crisis, exogenous shocks, in various forms and magnitudes, have multiplied to slow down the momentum of reform and decision-making.

This article aims to present and discuss the determinants of inflation targeting in Morocco in the context of gradual flexibilization of the exchange rate regime and its possible impacts on macroeconomic indicators in our country.

The first section will aim to situate monetary policy among the various economic policy instruments available to the executive branch; the second section will briefly present the key factors defining a monetary policy framework for inflation targeting. The third section summarizes the main determinants identified in the literature as a set of institutional, technical, and macroeconomic prerequisites.

Keywords: Monetary policy – Inflation targeting- transparency -credibility

JEL Classification: E31, O24.

Paper type: Theoretical research