Exchange Rate and Inflation Targeting in Morocco and Tunisia
The objective of this paper is to examine why Morocco and Tunisia should progressively opt for a monetary policy based on inflation targeting rather than exchange-rate targeting and money-growth rules, as their financial markets are increasingly liberalized and the exchange rate regime flexibility enhanced. First, the sources of inflation (cost push and demand pull factors as well as factors due to financial liberalization) are identified. Then, they are empirically tested for Granger causality and for regime transition with a Markov Switching model. Finally the institutional and operational conditions for the success of an inflation-targeting framework are outlined.
|Date of creation:||Jan 2008|
|Date of revision:||Jan 2008|
|Publication status:||Published by The Economic Research Forum (ERF)|
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