IDEAS home Printed from
   My bibliography  Save this paper

Credibility of Inflation Targeting in Morocco and Tunisia


  • Adel Boughrara

    () (University of Sousse, Tunisia)

  • Mongi Boughzala

    () (University of Tunis ElManar, Tunisia)

  • Hassouna Moussa

    (Acadia University, Canada)


Can the Moroccan and the Tunisian financial systems withstand the consequences of adopting IT, and is IT the appropriate monetary policy for them? There are many crucial requirements for the success of IT including independence of the central bank, fiscal discipline, a flexible exchange rate, and a strong and transparent financial system. Most of these requirements are actually important for any sound monetary policy. Not all of them are readily fulfilled in Morocco and Tunisia, some may be achieved gradually, eventually over a transition period, but there are some crucial prerequisite conditions that are not fulfilled. Absence of fiscal and financial dominance is one of them, and there are many other features not consistent with IT. We argue that, in spite of the many reforms they implemented Morocco and Tunisia fiscal and financial systems are not yet adequate for IT; in particular, the NPL problem undermines their effectiveness. The success of IT also depends on some institutional conditions that seem currently hard to meet, namely the government ability and willingness to establish a credible system ensuring fiscal and monetary discipline and central bank independence. Under the current conditions the government and the monetary authority may be reluctant to move to IT. The paper also presents a fairly simple dynamic simulation model taking into account some basic and specific features of the Moroccan and Tunisian systems. The simulations show that IT under the fragile current system may destabilize the economy and the target is likely to be missed when important exogenous (eventually external) shocks occur.

Suggested Citation

  • Adel Boughrara & Mongi Boughzala & Hassouna Moussa, 2008. "Credibility of Inflation Targeting in Morocco and Tunisia," Working Papers 448, Economic Research Forum, revised 09 Jan 2008.
  • Handle: RePEc:erg:wpaper:448

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Faust, Jon & Svensson, Lars E O, 2001. "Transparency and Credibility: Monetary Policy with Unobservable Goals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 369-397, May.
    2. Svensson, Lars E. O., 2002. "Inflation targeting: Should it be modeled as an instrument rule or a targeting rule?," European Economic Review, Elsevier, vol. 46(4-5), pages 771-780, May.
    3. Frederic S. Mishkin, 2002. "Does inflation targeting matter? - commentary," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 149-154.
    4. G. C. Lim & Guy Debelle, 1998. "Preliminary Considerations of an Inflation Targeting Framework for the Philippines," IMF Working Papers 98/39, International Monetary Fund.
    5. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:erg:wpaper:448. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sherine Ghoneim). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.