## Morocco: A Practical Approach to Monetary Policy Analysis in a Country with Capital Controls

_IMF Working Papers, February 14, 2018_

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## Bibliographic details
- Authors: Mokhtar Benlamine, Meryem Farouki, Ágnes Horváth, Faical Hossaini, Hasnae El Idrissi, Zineb Iraoui, Mihály Kovács, Douglas Laxton, Anass Maaroufi, Katalin Szilágyi, Mohamed Taamouti, David Vávra
- Published: February 14, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484341810.001

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### Executive summary
- The Central Bank of Morocco has been developing a Forecasting and Policy Analysis System (FPAS) to support a gradual move toward a more flexible exchange rate regime and the eventual adoption of a full-fledged inflation-targeting (IT) regime.
- At the center of the FPAS is a quarterly projection model tailored for two different types of exchange rate regimes:
  - A fixed exchange rate model version to be used during the pre-IT period.
  - A flexible exchange rate model version to prepare alternative scenarios for monetary policy decision makers to discuss the potential policy implications of shocks under an IT regime.

### Key findings and model features
- The FPAS uses a quarterly projection model designed specifically for Morocco’s policy transition from a conventional peg toward exchange rate flexibility and IT.
- Model applications:
  - Fixed exchange rate model: operational during pre-IT period.
  - Flexible exchange rate model: used to simulate alternative scenarios under an IT regime and to analyze policy implications of shocks.
- The system is intended to support gradual institutional and operational changes at the Central Bank of Morocco as it moves toward IT.

### Policy analysis and applications
- Purpose:
  - To inform monetary policy decision makers by providing alternative scenarios and shock analysis under different exchange rate regimes.
- Central capabilities:
  - Forecasting and policy simulation across regime versions (fixed and flexible).
  - Analysis of transmission mechanism elements referenced in keywords: BAM policy rate, interest rate, money-market interest rate differential, inflation aversion.

### Subjects and keywords (as provided)
- Subject: Conventional peg, Exchange rate arrangements, Exchange rate flexibility, Exchange rates, Foreign exchange, Inflation, Prices
- Keywords: BAM policy rate, Conventional peg, Exchange rate arrangements, Exchange rate flexibility, Exchange rates, forecasting and simulation, Global, Inflation, inflation aversion, interest rate, model construction, model economy, monetary policy, money-market interest rate differential, transmission mechanism, version of the MQPM, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2018/02/14/morocco-a-practical-approach-to-monetary-policy-analysis-in-a-country-with-capital-controls-45630_