Macroeconomic Implications of Covid-19 Pandemic in Morocco

Abstract

The aim of this paper is to study the effects of the Covid-19 Pandemic in Morocco and subsequent responses on the economy using in a linear DSGE model. The analysis takes into account internal and external shocks and a high level of unemployment since the pandemic crisis affects a priori some contact-intensive sectors but do widen to other sectors via general equilibrium, inducing a job loss worrying situation and subsequently a great recession. I use DSGE model with an open economy, nominal rigidities in prices and five types of agents (households, producers, retailers, monetary authority and fiscal authority). I calibrated the model using Bayesian techniques and data covering the period 1998Q1 – 2019Q2. Results indicate a lasting effect shock for at least 12 quarters after the impact. Higher public debt is an obvious result of all the shocks except for the consumption tax shock. Results indicates also a significant decline in GDP following external shocks, monetary policy shock, labor tax shock, capital tax shock and technology shock. The consumption tax shock has unlike the others a very small negative impact on GDP followed by an increase in GDP. For the government expenditure and investment shock, GDP eventually decreases after increasing on impact. The inflation shock has a surprisingly a positive impact on GDP followed by a negative one four quarters after the shock.