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Monetary and Fiscal Policies and the Dynamics of the Yield Curve in Morocco
Author:
Mr. Calixte Ahokpossi
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,
Pilar Garcia Martineznull

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, and
Laurent Kemoenull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 103
Language:
English
Publication Date:
23 May 2016
DOI:
https://doi.org/10.5089/9781484365465.001
ISBN:
9781484365465
ISSN:
1018-5941
Pages:
31
Keywords:
WP; yield curve factor; factor loading; macroeconomic variable; yield curve dynamics; Morocco yield curve; yield curve residual; Yield curve; interest rates; government bonds; Morocco; monetary policy shock; Inflation; Vector autoregression; Central bank policy rate; Inflation targeting; Maghreb
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We estimate the latent factors that underlie the dynamics of the sovereign bond yield curve in Morocco during 2004–14 based on the Dynamic Nelson-Siegel model. On this basis, we explore the interaction between macroeconomic variables and the yield curve, which is of direct relevance to macroeconomic policy-making. In Morocco’s context, we find that tighter monetary policy increases short-end maturities, and that the impact is small and short-lived. Economic activity is also briefly but significantly impacted, suggesting that even under a pegged exchange rate, monetary policy autonomy and effectiveness can be increased through greater central bank independence. Fiscal improvements significantly lower yield levels. Policy conclusions are that improvement in the fiscal and monetary policy frameworks, as well as greater financial sector development and inclusion, could benefit Morocco and strengthen the transmission mechanisms and effectiveness of macroeconomic policies.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2016: Issue 103