Sectoral Effects of Monetary Policy: Evidence from Morocco

By Charaf Eddine Moussir (Mohammed V University Agdal, Rabat, Morocco)

The effects of monetary policy on economic performance have long attracted the attention of economists and policy makers. In recent years, there seems to be a growing consensus among economists that monetary policy has an impact on the real economy, at least in the short term. The literature shows that monetary policy can have negative effects on sectoral growth and consequently on overall growth and that; different sectors of the economy react differently to monetary policy shocks (Serju 2003; Alam and Waheed 2006; Dal 2011). Therefore, it is necessary to know the sectors that respond first to a monetary policy shock and if the effects could be more important in some sectors than in others. This may provide pertinent information for economic policy purposes (Ganley and Salmon 1997). The empirical evidence on how the sectors react to monetary policy shocks is relevant about how to stimulate growth. Indeed, studies of sectoral analysis of the transmission channels of monetary policy in developing countries, in particular, indicate that tight monetary policy negatively affects agriculture and manufacturing, which are considered as the primary growth sectors for most developing economies (Serju 2003; Ifeanyichukwu and Olufemi 2012).

There is interest among researchers and policy makers in the effects of transmission of monetary policy on the real economy. Paradoxically, few works have focused on the study of the impact of transmission channels of monetary policy on aggregate growth by sector, even less for developing economies. The changes in monetary shocks on different sectors can occur due to the importance of a particular channel of the transmission mechanism for certain sectors and not for others. This relative intensity, in turn, depends crucially on the structure, the dependency and the availability of the bank credit, and the opening of a particular sector.

This paper investigates the sectoral effects of monetary policy in Morocco over the period 1998Q1 to 2014Q4 using a VAR model. The results of the analysis indicate that at the aggregate level a monetary policy tightening leads to a decrease in the overall GDP and price level. At the disaggregated level, monetary policy has disparate effects on the performance of the different sectors. The extraction industry, manufacturing, construction, hotels & restaurants, the financial and insurance activities are among the more sensitive sectors to monetary policy shocks. On the other hand, monetary policy innovations do not appear to have an adverse impact on agriculture and fishing sectors. This may be due to the structure of these sectors, which depend on a traditional organization (family structure, low use of bank loans). The preceding results imply that the interest rate channel plays a significant role in the transmission process in the case of Morocco.


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