How does the transparency and independence of central banks affect inflation? The case of Bank Al-Maghrib

Abstract

Characterized by secrecy, central banks have long treated monetary policy issues as a secret cult. However, over the past twenty years, with the development of the concept of rational expectations and the shift toward a price stability objective (Dincer et al., 2022; Pasten, E., Schoenle and Weber, 2018). As a result of their independence, central banks have shown a growing interest in communicating their monetary policies.This progress toward greater independence and transparency, as well as the central banks commitment to price stability, has led us to examine the effect of Bank Al-Maghrib’s transparency and independence on inflation, while also examining whether the relationship between transparency and inflation varies depending on the direction of monetary policy, distinguishing between periods of easing (ASSP) and tightening (RESR). The analysis covers 25 annual observations spanning the period from 2000 to 2024 and employs a distributed lag autoregressive (ARDL) model. The results show that, in the long run, transparency (β = −0.00073, p = 0.515) and central bank independence (β = −0.00294, p = 0.724) have negative but statistically insignificant coefficients. The interaction between transparency and monetary easing is also not significant (β = −0.00079, p = 0.673), while the interaction between transparency and monetary tightening is positive and significant at the 5% level (β = 0.00603, p = 0.046). In the short term, the change in transparency has a positive and significant coefficient (β=0.00500, p=0.016). These results thus highlight the conditional nature of the relationship between transparency and inflation, depending on the orientation of monetary policy. The contribution of this study lies in the joint analysis, applied to the Moroccan case, of transparency and central bank independence, as well as in the introduction of interaction effects that make it possible to identify a potential asymmetry in the effect of transparency between phases of monetary easing and tightening.

Classification JEL : C22, E31, E43, E52, E58.

Paper type : Theoretical Research or Empirical Research