This paper studies the impact of oil prices fluctuations on key
macroeconomics variables of Morocco. We will focus on the role of subsidy policy in the oil price-macro-economy relationship. The vector auto regression (VAR) model was used to analyze the data over the period 1993 to 2007. The results of the linear and non-linear models show that the oil prices shock can indirectly affect the economic activity. The oil price shock can hit economic activity through subsidy policy measured by cash payment for operating activities.