Abstract
Mainstream economists admit that when inflation gets too high, it negatively impacts economic growth. But at what level this threshold is too high? The aim of this study is to estimate an inflation threshold in the relationship between growth and inflation in Morocco. The analysis of quarterly data from 2000 to 2019 using the threshold model revealed that there is no linear relationship between these two variables. The results identified an inflation rate of 3% as optimal. The inflation threshold beyond which inflation negatively and significantly affects economic growth in Morocco is around an inflation rate of 3% with a statistically insignificant positive effect below this threshold. However, an amplification of the negative effect of the relationship between these two aggregates appears with the raising of the level of the inflation threshold above 3%. These results indicate that the Moroccan monetary authorities can slightly relax the constraints of the monetary rules of the inflation rate fixed at an implicit threshold below 2%.
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Article Details
- Year: 2022
- Volume: 43
- Issue: 4
- Pages: 103 - 130
- Accepted: 26.10.2022
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DOI:
https://doi.org/10.5281/zenodo.16895124 -
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How to Cite?
Hicham Sadok, Rachid El Fakir, Idriss Hakik (2022). Optimal Inflation Threshold and Economic Growth in Morocco: An empirical Analysis. Journal of Economic Cooperation and Development, 43(4), 103-130. https://doi.org/10.5281/zenodo.16895124
