Short-Run Monetary Policy Transmission, Credit Risk, and Bank Portfolio Adjustments: Evidence from the Non-Financial Corporate Sector in an Emerging Economy

Transmission de la politique monétaire à court terme, risque de crédit et ajustements de portefeuille bancaire: données issues du secteur des entreprises non financières dans une économie émergente

Adil Boutfssi () and Tarik Quamar
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Adil Boutfssi: UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar)
Tarik Quamar: UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar)

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Abstract: This paper examines the short-run transmission of monetary policy to bank credit granted to the non-financial corporate sector in Morocco, a bank-based emerging economy. Using monthly macro-financial data over the period of 2014–2024, the study estimates a reduced-form VAR model to analyze the dynamic interactions between the policy rate, bank credit, banks' holdings of sovereign securities, credit risk indicators, and short-term market spreads. Impulse response functions and forecast error variance decompositions indicate that a one-standard-deviation monetary policy shock is associated with a small and short-lived response of non-financial corporations bank credit at a monthly horizon, accounting for only a limited share of its forecast error variance, while the same shock is more strongly reflected in market spreads and banks' balance-sheet reallocations toward sovereign assets, alongside temporary movements in credit risk indicators. Overall, these results are consistent with a reduced-form transmission pattern in which monetary policy appears to affect bank credit primarily through indirect financial channels related to risk perception, portfolio reallocation, and balance-sheet management, rather than through immediate changes in aggregate credit volumes. This interpretation is conditional on the VAR specification and short-run horizon considered, and suggests an attenuation of the interest rate–credit channel in a bank-dominated emerging economy, rather than evidence of a structural breakdown of monetary transmission.

Keywords: monetary policy short-run monetary transmission credit risk bank balance sheets; monetary policy; short-run monetary transmission; credit risk; bank balance sheets (search for similar items in EconPapers)
Date: 2026-03-02
New Economics Papers: this item is included in nep-ara and nep-mon
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Published in Journal of Risk and Financial Management, 2026, 19 (3), pp.178. ⟨10.3390/jrfm19030178⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05541737

DOI: 10.3390/jrfm19030178

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