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The Side Effects of Macroprudential Policies on Economic Performance in the Arab Region

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  • Rami Obeid

    (Arab Monetary Fund, Abu Dhabi, United Arab Emirates)

Abstract

Macroprudential policy mainly aims to enhance financial stability and reduce the possibility of costly financial crises. However, to achieve this, macroprudential policy decisions may have some unintended side effects on economic growth. The paper provides an empirical framework for investigating potential side effects of macroprudential policy tools in developing countries. The results show that macroprudential policy decisions may lead to a decline in economic growth in developing countries, but the depth and efficiency of the financial sector may interact with macroprudential policy decisions to support economic environment stability. In the Arab region, the results differ compared to other developing countries, as the macroprudential policy interventions have a positive impact on economic growth, especially for the macroprudential tools that aim to enhance the resilience of the banking sector, while there is no effect of the cyclical macroprudential tools on economic growth.

Suggested Citation

  • Rami Obeid, 2024. "The Side Effects of Macroprudential Policies on Economic Performance in the Arab Region," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 13(2), pages 89-107.
    • Handle: RePEc:cbk:journl:v:13:y:2024:i:2:p:89-107
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    More about this item

    Keywords

    Macroprudential Policy; Central Banks; Economic Growth; Arab Region.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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