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Macroprudential policy and tools in a dual banking system: Insights from the literature

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  • Muhamed Zulkhibri

Abstract

The recent global financial meltdown highlights the need to promote financial stability through better regulation of financial institutions. The contentious debate strongly emphasizes, in particular, macroprudential tools, their implementation, and their effectiveness. This paper provides a critical review of theoretical and empirical research on the literature on Islamic finance that investigates macroprudential policy and its impact—specifically, the theoretical and empirical literature on the impact of macroprudential policy as it relates to financial stability and risk-taking in the Islamic and conventional financial systems. The findings suggest that only limited empirical research and analytical tools are available on macroprudential policy in the Islamic financial system because it is still in its infancy and far from able to create an analytical framework. Theoretical studies of macroprudential policy in Islamic finance have mixed results, and empirical research on it is not conclusive.

Suggested Citation

  • Muhamed Zulkhibri, 2019. "Macroprudential policy and tools in a dual banking system: Insights from the literature," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 19(1), pages 65-76, March.
    • Handle: RePEc:bor:bistre:v:19:y:2019:i:1:p:65-76
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    1. Jochen Mankart & Alexander Michaelides & Spyros Pagratis, 2020. "Bank capital buffers in a dynamic model," Financial Management, Financial Management Association International, vol. 49(2), pages 473-502, June.
    2. Gong Cheng & Dirk Mevis, 2019. "What happened to profitability? Shocks, challenges and perspectives for euro area banks," The European Journal of Finance, Taylor & Francis Journals, vol. 25(1), pages 54-78, January.
    3. Ahmet Faruk Aysan & Mustafa Disli & Huseyin Ozturk, 2017. "Financial Crisis, Macroprudential Policies And Depositor Discipline," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(01), pages 5-25, March.
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    5. Zakaria Firano & Fatine Filali A., 2017. "Determinants of The Application of Macro Prudential Instruments," Comparative Economic Research, Sciendo, vol. 20(3), pages 117-136, September.
    6. Lukas Pfeiffer & Libor Holub & Zdenek Pithart & Martin Hodula, 2017. "Leverage Ratio and its Impact on the Resilience of the Banking Sector and Efficiency of Macroprudential Policy," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(4), pages 277-299, August.
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    Cited by:

    1. Daniel Ofori-Sasu & Emmanuel Sarpong-Kumankoma & Saint Kuttu & Elikplimi Komla Agbloyor & Joshua Yindenaba Abor, 2024. "Risk-taking and systemic banking crisis in Africa: do regulatory policy framework provide new insight in threshold models?," Risk Management, Palgrave Macmillan, vol. 26(2), pages 1-37, May.
    2. Maria Afreen, 2020. "Analysing the Return on Asset to Construct Foretelling Indicator for Bangladeshi Banking Sector," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(4), pages 11-22, October.
    3. G. Gospodarchuk G. & Г. Господарчук Г., 2019. "Резервный буфер капитала как инструмент макропруденциальной политики // Reserve Capital buffer as an Instrument of Macroprudential Policy," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 23(4), pages 43-56.
    4. Arif Widodo, 2020. "Measuring Cyclical Behavior of Islamic and Conventional Financing: Evidence from Indonesian Dual Banking System قياس سلوك التمويل الإسلامي والتمويل التقليدي: دليل من النظام المصرفي الإندونيسي المزدوج," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 173-192, July.

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    More about this item

    Keywords

    Dual banking system; Financial stability; Islamic finance; Macroprudential policy;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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