IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/45310.html
   My bibliography  Save this paper

Pre- versus Post-Crisis Central Banking in Qatar

Author

Listed:
  • Elsamadisy, Elsayed Mousa
  • Alkhater, Khalid Rashid
  • Basher, Syed Abul

Abstract

In the years before the global financial crisis of 2008--2010, Qatar experienced a huge build-up of liquidity surplus in the banking system, mainly driven by surging net capital inflows. This paper identifies various sources of interbank liquidity in Qatar and discusses the various implications of structural primary liquidity surplus for the money market in particular and the economy at large. The paper attempts to evaluate the Qatar Central Bank policy making and conduct during the pre- and post-crisis periods within a framework of the Austrian monetary overinvestment theories, and concludes that the central bank had forcibly committed several forced monetary policy mistakes, which resulted in a breakdown in the interest rate channel of the monetary policy transmission mechanism. This led to the inability of the central bank to control the interbank interest rate and to an accelerating inflation rate during the pre-crisis years. In contrast, a dramatic change in the central bank's monetary policy framework and a deliberate monetary policy mistake on behalf of the central bank resulted in a restoration of the interest rate channel of the monetary policy transmission mechanism, stabilization of the interbank interest rate close to the central bank's policy rate and a sharp deceleration in the inflation rate in the post-crisis period. The paper concludes by offering brief policy recommendations.

Suggested Citation

  • Elsamadisy, Elsayed Mousa & Alkhater, Khalid Rashid & Basher, Syed Abul, 2013. "Pre- versus Post-Crisis Central Banking in Qatar," MPRA Paper 45310, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:45310
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/45310/1/MPRA_paper_45310.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ms. May Y Khamis & Mr. Abdelhak S Senhadji & Mr. Gabriel Sensenbrenner & Mr. Francis Y Kumah & Maher Hasan & Mr. Ananthakrishnan Prasad, 2010. "Impact of the Global Financial Crisis on the Gulf Cooperation Council Countries and Challenges Ahead," IMF Departmental Papers / Policy Papers 2010/001, International Monetary Fund.
    2. Wasseem MIchel Mina, 2010. "Institutional Reforms Debate and FDI Flows to MENA Region: Does One “Best” Fit All?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1034, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Marga PEETERS, 2011. "The Changing Pattern in International Trade and Capital Flows of the Gulf Cooperation Council Countries in Comparison with other Oil-Exporting Countries," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(7), pages 1-29, December.
    4. Christian Glocker & Pascal Towbin, 2012. "Reserve Requirements for Price and Financial Stability: When Are They Effective?," International Journal of Central Banking, International Journal of Central Banking, vol. 8(1), pages 65-114, March.
    5. Syed Abul Basher & Elsayed Mousa Elsamadisy, 2012. "Country heterogeneity and long-run determinants of inflation in the Gulf Arab states," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 36(2), pages 170-203, June.
    6. Mr. Carlo Cottarelli, 1993. "Limiting Central Bank Credit to the Government: Theory and Practice," IMF Occasional Papers 1993/008, International Monetary Fund.
    7. Andreas Hoffmann & Gunther Schnabl, 2011. "A Vicious Cycle of Manias, Crises and Asymmetric Policy Responses – An Overinvestment View," The World Economy, Wiley Blackwell, vol. 34(3), pages 382-403, March.
    8. Alan S. Blinder & Ricardo Reis, 2005. "Understanding the Greenspan standard," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 11-96.
    9. Bindseil, Ulrich & Camba-Mendez, Gonzalo & Hirsch, Astrid & Weller, Benedict, 2006. "Excess reserves and the implementation of monetary policy of the ECB," Journal of Policy Modeling, Elsevier, vol. 28(5), pages 491-510, July.
    10. International Monetary Fund, 2010. "Kenya: Staff Report for the 2009 Article IV Consultation," IMF Staff Country Reports 2010/026, International Monetary Fund.
    11. Anil K. Kashyap & Jeremy C. Stein, 2012. "The Optimal Conduct of Monetary Policy with Interest on Reserves," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 266-282, January.
    12. repec:pri:cepsud:114blinderreis is not listed on IDEAS
    13. International Monetary Fund, 2010. "Peru: Staff Report for the 2010 Article IV Consultation," IMF Staff Country Reports 2010/098, International Monetary Fund.
    14. DANNE, Christian & SCHNABL, Gunther, 2008. "A role model for China? Exchange rate flexibility and monetary policy in Japan," China Economic Review, Elsevier, vol. 19(2), pages 183-196, June.
    15. Alan S. Blinder & Ricardo Reis, 2005. "Understanding the Greenspan standard," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 11-96.
    16. Hoffmann, Andreas, 2009. "Fear of depression - Asymmetric monetary policy with respect to asset markets," MPRA Paper 17522, University Library of Munich, Germany.
    17. International Monetary Fund, 1997. "Sterilizing Capital inflows," IMF Economic Issues 1997/004, International Monetary Fund.
    18. Hoffmann, Andreas, 2013. "Did the Fed and ECB react asymmetrically with respect to asset market developments?," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 197-211.
    19. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Syed Abul Basher & Stefano Fachin, 2014. "Investigating long-run demand for broad money in the Gulf Arab countries," Middle East Development Journal, Taylor & Francis Journals, vol. 6(2), pages 199-214, July.
    2. Syed Basher, 2015. "Regional initiative in the Gulf Arab States: the search for a common currency," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 8(2), pages 185-202, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gunther Schnabl, 2012. "Monetary Policy Reform in a World of Central Banks," Global Financial Markets Working Paper Series 26-2012, Friedrich-Schiller-University Jena.
    2. Hoffmann, Andreas, 2013. "Did the Fed and ECB react asymmetrically with respect to asset market developments?," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 197-211.
    3. Hoffmann, Andreas & Schnabl, Gunther, 2016. "Monetary policies of industrial countries, emerging market credit cycles and feedback effects," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 855-873.
    4. Mayer, Thomas & Schnabl, Gunther, 2021. "Covid-19 and the euthanasia of interest rates: A critical assessment of central bank policy in our times," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1241-1258.
    5. Thomas Mayer & Gunther Schnabl, 2019. "Reasons for the Demise of Interest: Savings Glut and Secular Stagnation or Central Bank Policy?," CESifo Working Paper Series 7954, CESifo.
    6. Gunther Schnabl, 2016. "Central Banking and Crisis Management from the Perspective of Austrian Business Cycle Theory," CESifo Working Paper Series 6179, CESifo.
    7. Hoffmann, Andreas, 2009. "Fear of depression - Asymmetric monetary policy with respect to asset markets," MPRA Paper 17522, University Library of Munich, Germany.
    8. Andreas Hoffmann & Gunther Schnabl, 2016. "Adverse Effects of Ultra-Loose Monetary Policies on Investment, Growth and Income Distribution," CESifo Working Paper Series 5754, CESifo.
    9. Primus, Keyra, 2013. "Excess Reserves, Monetary Policy and Financial Volatility," MPRA Paper 51670, University Library of Munich, Germany.
    10. Gunther Schnabl, 2017. "The Failure of ECB Monetary Policy from a Mises-Hayek Perspective," CESifo Working Paper Series 6388, CESifo.
    11. Jiang, Lei, 2014. "Stock liquidity and the Taylor rule," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 202-214.
    12. Ronald Schettkat & Rongrong Sun, 2009. "Nicht zu früh bremsen! - Der Einfluss der Geldpolitik auf die langfristige Wirtschaftsentwicklung in Deutschland und den USA-," Schumpeter Discussion Papers sdp09003, Universitätsbibliothek Wuppertal, University Library.
    13. Marco Del Negro & Frank Schorfheide, 2009. "Monetary Policy Analysis with Potentially Misspecified Models," American Economic Review, American Economic Association, vol. 99(4), pages 1415-1450, September.
    14. Ginn, William & Pourroy, Marc, 2020. "Should a central bank react to food inflation? Evidence from an estimated model for Chile," Economic Modelling, Elsevier, vol. 90(C), pages 221-234.
    15. Jorge Enrique Restrepo Londono, 1998. "Reglas monetarias en una economía pequena y abierta," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 17(33), pages 61-84, July.
    16. Thomas Mayer & Gunther Schnabl, 2023. "How to escape from the debt trap: Lessons from the past," The World Economy, Wiley Blackwell, vol. 46(4), pages 991-1016, April.
    17. El-Shagi, Makram & Jung, Alexander, 2015. "Does the Greenspan era provide evidence on leadership in the FOMC?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 173-190.
    18. Andreas Hoffmann & Gunther Schnabl, 2011. "A Vicious Cycle of Manias, Crises and Asymmetric Policy Responses – An Overinvestment View," The World Economy, Wiley Blackwell, vol. 34(3), pages 382-403, March.
    19. Kui-Wai Li, 2013. "The US monetary performance prior to the 2008 crisis," Applied Economics, Taylor & Francis Journals, vol. 45(24), pages 3450-3461, August.
    20. Ahmad, Saad, 2016. "A multiple threshold analysis of the Fed's balancing act during the Great Moderation," Economic Modelling, Elsevier, vol. 55(C), pages 343-358.

    More about this item

    Keywords

    Monetary policy framework; Monetary policy mistakes; Liquidity management; Structural liquidity surplus; Financial crisis.;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:45310. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.