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Macroprudential Policy in the GCC Countries

Author

Listed:
  • Ms. Zsofia Arvai
  • Mr. Ananthakrishnan Prasad
  • Mr. Kentaro Katayama

Abstract

As undiversified commodity exporters, GCC economies are prone to pro-cyclical systemic risk in the financial system. During periods of high hydrocarbon prices, favorable economic prospects make the financial sector keen to lend, leading to higher domestic credit growth and easier access to external financing. Fiscal policy is a very important tool for macroeconomic management, but due to the significant time lags and expenditure rigidities, it has not been a flexible enough tool to prevent credit booms and the build-up of systemic risk in the GCC. This, together with limited monetary policy independence because of the pegged exchange rate, means that macro-prudential policy has a particularly important role in limiting systemic risk in the financial system. This importance is reinforced by the underdeveloped financial markets in the region that provide limited risk management tools and shortcomings in crisis resolution frameworks. This paper will discuss the importance of macro-prudential policy in the GCC countries, look at the experience with macro-prudential policies in the boom/bust cycle in the second half of the 2000s, and use the broad frameworks being developed in the Fund and elsewhere to discuss ways existing frameworks and policy toolkits in the region can be strengthened given the characteristics of the GCC economies.

Suggested Citation

  • Ms. Zsofia Arvai & Mr. Ananthakrishnan Prasad & Mr. Kentaro Katayama, 2014. "Macroprudential Policy in the GCC Countries," IMF Staff Discussion Notes 2014/001, International Monetary Fund.
    • Handle: RePEc:imf:imfsdn:2014/001
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    Citations

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    Cited by:

    1. International Monetary Fund, 2016. "Morocco: Technical Note-Macroprudential Policy: Institutional Arrangements and Instruments," IMF Staff Country Reports 2016/330, International Monetary Fund.
    2. Miyajima, Ken & Khandelwal, Padamja & Santos, Andre, 2017. "The Impact of Oil Prices on the Banking system in the Gulf Cooperation Council," MPRA Paper 92371, University Library of Munich, Germany.
    3. Maghyereh, Aktham & Abdoh, Hussein, 2021. "The effect of structural oil shocks on bank systemic risk in the GCC countries," Energy Economics, Elsevier, vol. 103(C).
    4. Velauthapillai, Jeyakrishna, 2015. "Makroprudenzielle Regulierung – eine kurze Einführung und ein Überblick," EconStor Preprints 116781, ZBW - Leibniz Information Centre for Economics.
    5. D. Burton, 2021. "Consumer Debt Prevention and Discharge in the Arabian Gulf," Journal of Consumer Policy, Springer, vol. 44(1), pages 21-42, March.
    6. Saibal Ghosh, 2016. "Capital Buffer, Credit Risk and Liquidity Behaviour: Evidence for GCC Banks," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 58(4), pages 539-569, December.
    7. Padamja Khandelwal & Mr. Ken Miyajima & Mr. Andre O Santos, 2016. "The Impact of Oil Prices on the Banking System in the GCC," IMF Working Papers 2016/161, International Monetary Fund.
    8. Min Liao & Tao Sun & Jinfan Zhang, 2016. "China’s Financial Interlinkages and Implications For Inter-Agency Coordination," IMF Working Papers 2016/181, International Monetary Fund.
    9. Magda Kandil & Minko Markovski, 2019. "UAE Banks’ Performance and the Oil Price Shock: Indicators for Conventional and Islamic Banks," Working Papers 1284, Economic Research Forum, revised 2019.
    10. Herrala, Risto & Turk-Ariss, Rima, 2016. "Capital accumulation in a politically unstable region," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 1-15.
    11. International Monetary Fund, 2014. "Kuwait: Selected Issues," IMF Staff Country Reports 2014/334, International Monetary Fund.

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