Asymmetric transmission of oil shocks and geopolitical risk to inflation in an energy-importing economy: multi-threshold evidence from Morocco

This study examines the effects of oil price shocks and geopolitical risk on inflation in Morocco, an energy-importing economy operating under a managed-float exchange-rate regime. Using monthly data from June 2007 to December 2025, the analysis employs a multiple-threshold nonlinear ARDL model. Oil prices, geopolitical risk, and their interaction are decomposed into quintile-based regimes within a unified cointegration framework. The results reveal strong magnitude-dependent asymmetries. Oil price pass-through is insignificant in the lower and middle regimes and becomes marginally significant only in the upper regime when the policy rate I included (Q 5 : 0.025). Geopolitical risk reduces inflation at moderate stress levels (Q 3 : −0.617) but turns positive and insignificant in the upper regime (Q 5 : 0.024). The compound oil-geopolitical risk effect is non-monotonic and sub-additive. In the long run, it is significant in the upper regime without the policy rate (Q 5 : 0.038), while short-run effects become significant only when the policy rate is included, shifting from negative at moderate stress (Q 3 : −0.031) to positive at extreme stress (Q 5 : 0.026). Wald tests consistently confirm long-run asymmetry. Foreign exchange reserves are positively associated with inflation, with stronger coefficients under compound-stress conditions. Error-correction estimates imply half-lives of 2.4-6.7 months. Robustness checks, including sub-sample analysis and estimation using a quantile nonlinear ARDL (QNARDL) model, demonstrate that these transmission mechanisms have intensified in the post-COVID period. The results confirm the significance of both the oil-price and compound-shock channels. These findings highlight the necessity of energy diversification and a proactive monetary policy response to external shocks. For oil-importing economies, maintaining flexibility in the managed exchange rate constitutes an important policy instrument in the presence of compound external shocks.

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Publication Details

Journal
The Journal of Economic Asymmetries
Published
2026-10-06
DOI
https://doi.org/10.1016/j.jeca.2026.e00481
Primary Topic
Market Dynamics and Volatility
Type
article
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article

Asymmetric transmission of oil shocks and geopolitical risk to inflation in an energy-importing economy: multi-threshold evidence from Morocco

Hafid El Hassani, Amine Kendri
The Journal of Economic Asymmetries
Market Dynamics and Volatility
article

Asymmetric transmission of oil shocks and geopolitical risk to inflation in an energy-importing economy: multi-threshold evidence from Morocco

Hafid El Hassani, Amine Kendri
article en

Abstract

This study examines the effects of oil price shocks and geopolitical risk on inflation in Morocco, an energy-importing economy operating under a managed-float exchange-rate regime. Using monthly data from June 2007 to December 2025, the analysis employs a multiple-threshold nonlinear ARDL model. Oil prices, geopolitical risk, and their interaction are decomposed into quintile-based regimes within a unified cointegration framework. The results reveal strong magnitude-dependent asymmetries. Oil price pass-through is insignificant in the lower and middle regimes and becomes marginally significant only in the upper regime when the policy rate I included (Q 5 : 0.025). Geopolitical risk reduces inflation at moderate stress levels (Q 3 : −0.617) but turns positive and insignificant in the upper regime (Q 5 : 0.024). The compound oil-geopolitical risk effect is non-monotonic and sub-additive. In the long run, it is significant in the upper regime without the policy rate (Q 5 : 0.038), while short-run effects become significant only when the policy rate is included, shifting from negative at moderate stress (Q 3 : −0.031) to positive at extreme stress (Q 5 : 0.026). Wald tests consistently confirm long-run asymmetry. Foreign exchange reserves are positively associated with inflation, with stronger coefficients under compound-stress conditions. Error-correction estimates imply half-lives of 2.4-6.7 months. Robustness checks, including sub-sample analysis and estimation using a quantile nonlinear ARDL (QNARDL) model, demonstrate that these transmission mechanisms have intensified in the post-COVID period. The results confirm the significance of both the oil-price and compound-shock channels. These findings highlight the necessity of energy diversification and a proactive monetary policy response to external shocks. For oil-importing economies, maintaining flexibility in the managed exchange rate constitutes an important policy instrument in the presence of compound external shocks.

The Journal of Economic AsymmetriesVol. 34
Sidi Mohamed Ben Abdellah University (MA)
Openalex Percentile: Top 8%
Market Dynamics and Volatility
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