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Short-Run Inertia and Long-Run Adjustment in Bank Credit: An ARDL–ECM Analysis of Monetary Transmission in an Emerging Economy
[Inertie à court terme et ajustement à long terme du crédit bancaire : une analyse ARDL-ECM de la transmission monétaire dans une économie émergente]

Author

Listed:
  • Adil Boutfssi

    (UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar))

  • Youssef Zizi

    (USMBA - Université Sidi Mohamed Ben Abdellah [Fès, Maroc])

  • Tarik Quamar

    (UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar))

Abstract

This study examines the transmission of monetary policy to bank credit granted to the non-financial private sector in Morocco, a bank-dominated emerging economy where non-financial corporations play a central role in investment, employment, and economic growth. Using monthly data over the period 2006–2023, the analysis relies on an ARDL–ECM framework that distinguishes short-run credit dynamics from long-run adjustment processes while accounting for potential structural breaks. The results indicate that changes in the policy rate do not exert a statistically significant effect on bank credit in the short run, suggesting a high degree of credit inertia. The bounds test supports the existence of a stable long-run equilibrium relationship in credit, although no significant long-run elasticities with respect to monetary policy or credit risk variables are identified. Instead, credit dynamics appear to be driven primarily by short-run adjustment mechanisms, largely shaped by credit risk and balance-sheet allocation. Overall, these findings suggest that monetary transmission in Morocco operates gradually and indirectly, mainly through prudential and balance-sheet channels rather than the conventional interest-rate channel. This implies that the effectiveness of monetary policy depends critically on prevailing risk conditions and their interaction with prudential frameworks in bank-based emerging financial systems.

Suggested Citation

  • Adil Boutfssi & Youssef Zizi & Tarik Quamar, 2026. "Short-Run Inertia and Long-Run Adjustment in Bank Credit: An ARDL–ECM Analysis of Monetary Transmission in an Emerging Economy [Inertie à court terme et ajustement à long terme du crédit bancaire : une analyse ARDL-ECM de la transmission monétaire," Post-Print hal-05541741, HAL.
    • Handle: RePEc:hal:journl:hal-05541741
    DOI: 10.3390/jrfm19030195
    Note: View the original document on HAL open archive server: https://hal.science/hal-05541741v1
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