Dissecting the Moroccan business cycle: A trade-based identification of agricultural supply shocks

The consideration of the agricultural sector within the business cycle analysis is crucial for both diagnostic analysis and economic policy in developing countries. One of the critical issues is the identification of agricultural supply shocks. This paper introduces a novel approach to identify these shocks, based on the foreign trade of agricultural products. This contrasts with existing literature, which relies upon weather variables such as precipitation or temperature. Our approach is applied to dissect the business cycle in Morocco from 1999 to 2019, employing Structural Vector Autoregressive (SVAR) models identified by sign restrictions and exogeneity assumptions. Our framework has demonstrated its ability to replicate agricultural fluctuations in Morocco. In addition, our estimates indicate that agricultural supply shocks play a substantial role in output fluctuation (accounting for almost a third of its variability), but do not exert a significant effect on inflation, contrary to what is documented in other countries.