The Impact of Money Supply, Interest Rate and Inflation Rate on Economic Growth: A Case of Morocco

Abstract

The purpose of our study is to examine the impact of money supply, interest rate and inflation rate on the economic growth in Morocco from 1990 to 2020. This research empirically analyzes how the key monetary settings interact and influence Morocco's Gross Domestic Product, using annual data on money supply, interest rates, and inflation sourced from the Moroccan Central Bank and the World Bank development Indicators. To explore the complex interactions and causal effects of the selected macroeconomic indicator on economic growth, we have employed a quantitative analysis based on the Vector Autoregression (VAR) model and cointegration, implemented using the R programming language. The main findings reveal that money supply significantly boosts economic growth, while interest rates have negative effects. Moreover, inflation positively influences short-term economic growth. These insights enhance understanding of the role that monetary policy plays in promoting economic development. This research enriches the academic literature by addressing a gap concerning Morocco’s economic dynamics and guiding policymakers to develop more effective monetary strategies.