Global Oil Shocks and Inflation in Morocco

Abstract

This article explores the evolution of the correlation between global oil prices and inflation in Morocco, with special attention to the fuel subsidy reforms that took place between 2012 and 2015. By using rolling regression analysis and structural breaks tests, it has been found that there was not any remarkable breakpoint during the reforms. This result suggests that tools related to price stabilization or monetary policies were efficient in mitigating inflationary pressures in the short term. There has been a subtle transition in the beginning of the 2000s to correspond with the deregulation of the petroleum industry in general and the macroeconomic adjustment reforms. The absence of any remarkable breakpoint since 2015 might be related to inadequate data, delay in the transmission process of economic fluctuation, or the global reduction in oil prices. These results highlight the complex interaction between variations in oil prices and inflationary processes and the prominent effect of institutional and global factors in the inflationary process in the Moroccan economy.