The impact of monetary policy on economic growth in Morocco: An econometric study with the ARDL model

Abstract

The main objective of central banks is to ensure price stability, the achievement of this objective depends on the effect of monetary policy on economic activity. In Morocco With the start of the financial liberalization process in the early 1980s, several financial reforms were introduced. The aim was to gradually relax the regulation of interest rates, and to ensure the abandonment of quantitative constraints on bank loans. This allowed banks to have more autonomy vis-à-vis the institute. Issue as well as a large margin of maneuvers in terms of financing the economy. However, questions have begun to arise about the effectiveness of monetary policy and its impact on economic growth.

The main objective of this article is to study the dynamics between economic growth and monetary policy in Morocco. Our data are annual and cover the period from 1990 to 2021, they were extracted from the database of the World Bank and the High Commission for Planning. To do this, we use the ARDL approach.

The results obtained by the modeling and the tests of causality in the sense of Granger show that the monetary policy in Morocco is ineffective, it has no impact on the variation of the real production, it rather generates an inflationary dynamic. Thus several actions can be envisaged to remedy this situation, for this purpose we cite the development of infrastructure and investment in human capital, the coordination of monetary and budgetary policies within the framework of an effective policy mix and the need for integrate the informal sector by facilitating administrative procedures and access to financing.

Keywords: Monetary Policy, Economic Growth, Inflation, ARDL, Causality, Morocco                                            

JEL Classification: E 52

Paper type: Empirical research