Shockwaves abroad and the vulnerability of monetary policy: Morocco’s Central Bank response to geopolitical shocks and commodity price volatility

This paper investigates the transmission mechanisms of geopolitical risk and commodity price volatility to Morocco’s monetary policy and assesses the central bank’s response to externally driven inflationary pressures. Using monthly data from 1995-2025, a Bayesian Vector Autoregression (BVAR) model comprising six macroeconomic variables is estimated. The results indicate that shocks to geopolitical risk, crude oil, and cereal prices exert persistent inflationary effects through imported inflation channels. The policy rate responds with a lag, consistent with its periodic decision-making framework, underscoring the structural constraints faced by monetary authorities in managing externally induced inflation and requiring fiscal coordination and targeted supply-side measures.