Assessing the Impact of Structural Reforms on Potential Output: The Case of Morocco

IMF Working Papers, October 27, 2023

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This paper assesses Morocco’s potential output and the scope for structural reforms to reverse the downward trend in economic performance observed since the Global Financial Crisis.
Using multivariate filtering (MVF) techniques, the analysis finds that the downward secular trend in potential growth was primarily driven by the decline in the contribution of labor inputs.
The authors combine production function and general equilibrium model approaches to provide estimates of the potential macroeconomic impact of Morocco’s structural reform agenda.
The results suggest that the planned structural reforms could deliver sizable output gains in the medium to long term, with reforms that would reduce the large gender gap in Morocco’s labor market yielding the greatest payoffs.

Multivariate filtering (MVF) techniques were used to estimate potential output and decompose drivers of the downward secular trend in potential growth.
A combination of production function and general equilibrium model approaches was used to estimate the potential macroeconomic impact of structural reforms.
Subject and keyword tags used in the paper include: Labor, Labor force participation, Macrostructural analysis, Potential output, Production, Production growth, Structural reforms, Total factor productivity; and keywords such as dynamic stochastic general equilibrium models, fiscal policy, multivariate filter, production function approach, reform multiplier.

The downward secular trend in Morocco’s potential growth was primarily driven by the decline in the contribution of labor inputs.
Planned structural reforms could deliver sizable output gains in the medium to long term.
Reforms that reduce the large gender gap in Morocco’s labor market are identified as yielding the greatest payoffs.

Prioritize structural reforms that increase labor force participation, with particular focus on reducing the gender gap in the labor market.
Use a mix of production function and general equilibrium assessments to quantify macroeconomic impacts and design reform packages with medium- to long-term output gains in mind.