Are the Conditions for the Adoption of IT Satisfied in Morocco?

Adel Boughrara, Mongi Boughzala () and Hassouna Moussa
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Mongi Boughzala: University of Tunis ElManar, Tunisia

No 444, Working Papers from Economic Research Forum

Abstract: The objective of this paper is to explore the feasibility and efficiency of inflation targeting as a new monetary strategy in Morocco. Inflation targeting (IT) is a strategy that aims primarily at controlling inflation and makes it its main objective, but it goes well beyond the simple adoption of a quantitative goal for inflation. A central bank following IT has to set up well-defined rules and performance goals for which it is held accountable by the media, the markets and the government. IT framework is demanding in terms of institutional and economic conditions. These conditions include: central bank independence, accountability and transparency, a sound financial system, fiscal discipline and a flexible exchange rate regime. Through the analysis of the recent monetary and fiscal policies in Morocco and a systematic examination of the fulfillment of the IT conditions we argue that morocco is not yet ready for IT and a transition period would be required. The possibility and the risks linked to the adoption of IT in Morocco are explored through a formal model in the last section of this paper.

Pages: 33
Date: 2008-01-09, Revised 2008-01-09
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