Short-Run Inertia and Long-Run Adjustment in Bank Credit: An ARDL–ECM Analysis of Monetary Transmission in an Emerging Economy

Inertie à court terme et ajustement à long terme du crédit bancaire: une analyse ARDL-ECM de la transmission monétaire dans une économie émergente

Adil Boutfssi (), Youssef Zizi () and Tarik Quamar ()
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Adil Boutfssi: UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar)
Youssef Zizi: USMBA - Université Sidi Mohamed Ben Abdellah [Fès, Maroc]
Tarik Quamar: UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar)

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Abstract: This study examines the transmission of monetary policy to bank credit granted to the non-financial private sector in Morocco, a bank-dominated emerging economy where non-financial corporations play a central role in investment, employment, and economic growth. Using monthly data over the period 2006–2023, the analysis relies on an ARDL–ECM framework that distinguishes short-run credit dynamics from long-run adjustment processes while accounting for potential structural breaks. The results indicate that changes in the policy rate do not exert a statistically significant effect on bank credit in the short run, suggesting a high degree of credit inertia. The bounds test supports the existence of a stable long-run equilibrium relationship in credit, although no significant long-run elasticities with respect to monetary policy or credit risk variables are identified. Instead, credit dynamics appear to be driven primarily by short-run adjustment mechanisms, largely shaped by credit risk and balance-sheet allocation. Overall, these findings suggest that monetary transmission in Morocco operates gradually and indirectly, mainly through prudential and balance-sheet channels rather than the conventional interest-rate channel. This implies that the effectiveness of monetary policy depends critically on prevailing risk conditions and their interaction with prudential frameworks in bank-based emerging financial systems.

Keywords: portfolio adjustments; balance-sheet effects; long-run dynamics; emerging markets; credit risk; bank credit; monetary transmission mechanism; monetary transmission mechanism bank credit credit risk portfolio adjustments balance-sheet effects long-run dynamics emerging markets (search for similar items in EconPapers)
Date: 2026-03-06
New Economics Papers: this item is included in nep-ara
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Published in Journal of Risk and Financial Management, 2026, 19 (3), pp.195. ⟨10.3390/jrfm19030195⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05541741

DOI: 10.3390/jrfm19030195

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