Modeling the impact of external shocks on the Moroccan economy

Abstract

The global economic conditions of recent years can be grouped into three themes: volatile global commodity prices, slowing global growth, and persistent financial market stress. Policymakers need to know the sign, size, and timing of these effects before making policy decisions at the national level. We studied the impact of external shocks on the Moroccan economy, taking the price of oil, global inflation, and the real GDP of the European Union as the vector of external shocks. We used the VAR approach to simulate the impact of each variable on national economic growth using annual data from 1990 to 2020. All the variables used in our model were collected from the World Bank and the International Monetary Fund. The results show that the magnitude of the shocks is indeed different. The study shows that the oil price dominates the variances of the GDP forecast errors illustrating the possibility of imported inflation in Morocco, the rise in commodity prices can be a source of inflation because of the potential linkages through the multiplier effects of the energy sector with other sectors of the Moroccan economy.

Keywords: External shocks, VAR, GDP, Economic activity, Morocco

JEL Classification : C32, E32, F42, F43

Paper type: Empirical research