Effectiveness of Monetary Policy Transmission in Morocco amid Reforms to the Monetary Policy Framework

摘要

This paper assesses the effectiveness of Morocco’s monetary policy transmission since 2018 in light of reforms aimed at modernizing the policy framework. Over the past decade, Morocco has introduced greater exchange rate flexibility, strengthened the legal and operational focus on price stability, and enhanced central bank communication—measures intended to anchor inflation expectations and improve transmission. Drawing on several years of post-reform data, we use a two-step empirical strategy: (i) identifying exogenous monetary policy shocks through a Taylor-rule-based approach leveraging Bank Al-Maghrib’s forecasts, and (ii) estimating their dynamic effects via local projections, a flexible approach well suited to settings with structural change and limited data. Our findings indicate that transmission to output and inflation has strengthened post-reform: a 1 percentage point policy rate hike reduces output by about 0.3 percent and inflation by 0.1 percent, compared to 0.1 and 0.05 percent pre-reform, respectively. However, responses remain delayed and muted relative to benchmark estimates for other emerging markets. Analysis of transmission channels shows the interest rate channel is most active, the credit channel is partially effective, and the exchange rate channel is stronger post-reform, while the asset price and expectations channels remain weak. These findings provide important insights for Morocco’s ongoing transition to an inflation targeting regime.