<![CDATA[Purpose This study examines how monetary-fiscal coordination affects the effectiveness of inflation targeting in Morocco, with particular attention to the role of monetary dominance. Drawing on the Sargent and Wallace framework, the study argues that inflation targeting is more effective when the central bank can focus on price stability without being constrained by fiscal financing pressures. Design/methodology/approach The study applies a Vector Error Correction Model (VECM) using Moroccan data from 1980 to 2021. The model is used to assess the relationship between monetary policy variables and inflation. Impulse response functions are also employed to examine how monetary authorities respond to fiscal policy shocks. Findings The results show that monetary policy plays an important role in influencing inflation in Morocco. In the long run, inflation is positively associated with both the interbank interest rate and money supply. However, in the short run, a restrictive monetary policy, reflected in a rise in interest rates, tends to reduce inflation. The findings also suggest that the interaction between monetary and fiscal policy matters for inflation control. In particular, the central bank appears to accommodate fiscal expansion more through adjustments in money supply than through interest rate changes. Research limitations/implications The empirical study focuses only on the Moroccan case, which represents a major limitation of the present research paper. As a suggestion for future research, it would be interesting to explore the nexus between coordination scheme and inflation targeting policy in a sample of countries with economic structure similar to that of Morocco. Originality/value The study proposes a framework for analyzing the effectiveness of inflation targeting policy that takes into account the potential effects linked to the coordination scheme choices.]]>
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