Macro-Prudential Regulation, Monetary Policy and Systemic Banking Crises in Africa

Joshua Yindenaba Abor (), Daniel Ofori-Sasu (), Joseph G. Nellis () and Christopher J. Green ()
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Joshua Yindenaba Abor: University of Ghana Business School, Legon
Daniel Ofori-Sasu: Central University, Miotso
Joseph G. Nellis: Cranfield School of Management
Christopher J. Green: Loughborough University

Chapter Chapter 20 in The Economics of Banking and Finance in Africa, 2022, pp 659-709 from Palgrave Macmillan

Abstract: Abstract This study examines how macro-prudential regulation is related to the predicted probability of systemic banking crises. Given a wide range of regulatory frameworks across different economies and their complex relationships, we investigate how monetary policy stance affects the link between measures of macro-prudentialMacro-prudential regulation and banking crises. Using a panel logit regression of 532 banks in 29 African countries over the period, 2006–2018, we confirm that macro-prudential regulation and monetary policy play significant roles in reducing the probability of systemic banking crises. We also find evidence to support that tightening monetary policy alters the negative effect of macro-prudential policy action on systemic banking crises, and that a tight monetary policy stance magnifies the negative effects of both countercyclical capital requirement and reserve requirement on systemic banking crises. Interestingly, the interaction effect between measures of macro-prudentialMacro-prudential regulation and monetary policy in reducing systemic banking crises seems to favour countries with strong institutions compared to those with weak institutions.

Keywords: Macro-Prudential Regulation; Monetary Policy; Systemic Banking Crises (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-031-04162-4_20

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DOI: 10.1007/978-3-031-04162-4_20

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