WP/09/53

Credit Market in Morocco: A Disequilibrium Approach
Laurence Allain and Nada Oulidi

© 2009 International Monetary Fund

WP/09/53

IMF Working Paper Middle East and Central Asia and Monetary and Capital Markets Departments Credit Market in Morocco: A Disequilibrium Approach Prepared by Laurence Allain and Nada Oulidi Authorized for distribution by Joël Toujas-Bernaté andDaniel Hardy March 2009

Abstract This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

In this paper we use adisequilibrium framework common in the “credit crunch” literature, first to examine whether the slow credit growth in Morocco during the rapid expansion of liquidity in the first half of the decade can be attributed to credit rationing, and second to investigate the role of asset price increases in the recent acceleration of credit growth. Our results do not support the credit rationing hypothesis inthe first half of the decade. They do however, show that the recent increase in real estate prices stimulated credit supply and demand, with a stronger effect on the latter. JEL Classification Numbers: G21; G20 Keywords: Credit growth, credit demand, credit supply, real estate prices Authors’ E-Mail Addresses: [email protected]; [email protected]

2 Contents Page

I. Introduction…………………………………………………………………………………………………………….3 II. Overview of Credit Market Developments …………………………………………………………………4 III. Literature Review…………………………………………………………………………………………………..7 IV. EstimationStrategy………………………………………………………………………………………………..9 V. Estimation Results…………………………………………………………………………………………………11 VI. Concluding Remarks ……………………………………………………………………………………………14References………………………………………………………………………………………………………………..18 Figures 1. Required Bank Reserves and Official Reserves, 2000–07 ……………………………………..4 2. Treasury Bill Rate, 2000–07 ………………………………………………………………………………4 3. Private Sector Credit in Percent of GDP,2000–07………………………………………………..5 4. Structure of Banking System Assets……………………………………………………………………5 5. Credit to the Economy (2002=100) …………………………………………………………………….6 6. Evolution of Real Estate Stock Market Index……………………………………………………….6Appendixes I. Unit Root Tests ………………………………………………………………………………………………16 II. Cointegration Tests …………………………………………………………………………………………17

3 I. INTRODUCTION1 The success of Morocco’s economic reform program since the turn of the century has substantially strengthenedmacroeconomic conditions, accelerated the pace of non-agricultural growth, and improved the soundness of the financial sector. Increase in tourism and remittance receipts, coupled with higher capital inflows, have sustained current account surpluses for most of the period, and boosted domestic liquidity. In contrast with what happened in other regions of the world, these developments did not…