Bank Al-Maghrib’s response to the Covid-19 health shock: documentary and quantitative empirical analysis of the Moroccan case

Abstract

The Covid-19 pandemic represented a major exogenous shock for open economies, combining a contraction in real activity, disruptions to financial conditions and a sharp rise in uncertainty. Against this background, this article analyzes Bank Al-Maghrib’s response to the health shock while examining how monetary action interacted with the budgetary and financial constraints of the Moroccan economy. The study contributes in two ways. Analytically, it clarifies the channels through which a central bank can act when the initial shock does not originate in the monetary sphere. Empirically, it builds a real annual database for 2010-2024 using public data from Bank Al-Maghrib, the World Bank, the International Monetary Fund, FRED and the Penn World Table. The methodology relies on a documentary and quantitative empirical approach combining descriptive statistics, period comparison, correlation analysis and an exploratory regression with HC3 robust standard errors. The results indicate that monetary policy was significantly eased in 2020: the policy rate declined from 2.25 percent at the end of 2019 to 1.50 percent at the end of 2020, while reserve requirements were reduced to zero. This accommodative stance was accompanied by higher international reserves, but also by a marked deterioration in the fiscal balance in 2020. The article concludes that the monetary response helped preserve liquidity and financial stability, although its effectiveness remained conditional on fiscal coordination and on the structural features of monetary transmission in Morocco.

JEL Classification: E52, E58, E44, H12.

Paper type: Documentary and quantitative empirical analysis.