Assessing the effectiveness of monetary policy in reducing fiscal deficits: An econometric study of Morocco

Abstract

This study examines the effectiveness of monetary policy in reducing Morocco’s budget deficit over the period 2000–2024. Using the ARDL approach and annual data, it explores both short- and long-term relationships between fiscal balance and key monetary and macroeconomic variables such as interest rates, inflation, exchange rates, public debt, and government revenue. The results confirm the existence of a long-run equilibrium and highlight the significant short-term effects of monetary variables on fiscal performance. Findings underline the importance of policy coordination to ensure fiscal sustainability. This research contributes to the literature by identifying the main transmission channels and offering recommendations to improve the coherence between monetary and fiscal policies in Morocco.