Monetary policy challenges in Morocco: Exploring the possibility of reconciling price stability and economic growth

Abstract

In this research paper, we used the VECM framework to assess Moroccan central bank’s ability to target inflation. We also explored the possibility of reconciling between inflation control and growth stimulation through an impulse response analysis. Our empirical results showed that interest rate adjustments as monetary policy measure could be a relevant choice in a context of moderate and short-lived inflation since it provides a wide margin for reconciling price stability and economic growth. In times of high and persistent inflation, the central bank should prioritize inflation control through a permanent decrease in its money supply.