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

Rami Obeid ()
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Rami Obeid: Arab Monetary Fund, Abu Dhabi, United Arab Emirates

Journal of Central Banking Theory and Practice, 2024, vol. 13, issue 2, 89-107

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.

Keywords: Macroprudential Policy; Central Banks; Economic Growth; Arab Region. (search for similar items in EconPapers)
JEL-codes: G10 G18 G21 O16 O40 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:13:y:2024:i:2:p:89-107

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