Measuring natural interest rate in Morocco

This paper estimates Morocco's natural interest rate (NIR) using two approaches: a standard HLW-type framework and an augmented specification that incorporates external factors, namely imported inflation, and movements in the real effective exchange rate. The results point to a downward trend in the natural rate following the Global Financial Crisis and an increase during the post pandemic inflationary episode. The REER-augmented model delivers higher estimates than the baseline, particularly in periods of inflationary pressures. On average, the natural interest rate is estimated to stand at around 2.6 percent over the sample period, implying a negative interest rate gap relative to the policy rate.