The Effects of Bank Regulation on Financial Development in the MENA Countries: The Supporting Role of Supervision

Iranian Economic Review 2018

20 Pages Posted: 11 Aug 2021

See all articles by Chadi Azmeh

Chadi Azmeh

International University for Science & Technology

Date Written: November 6, 2018

Abstract

This study investigates the impact of bank regulation on financial development in the MENA countries for the period 1995-2014. Restrictions on activity, foreign banks, and capital were used as proxies for bank regulation. Also, bank supervisory power, independence, private monitoring, and moral hazard were used as proxies for bank supervision. Liquid liabilities, private credit, and z-score were chosen as proxies for financial development. They represent, consecutively, size, activity, and stability of the financial sector. A positive and significant impact of bank regulation was observed on all measures of financial development. The most important contribution of the present study is that, it gives evidence of an important supporting role of supervision on bank regulation, to realize its desired impact on financial development. This final result is important for the MENA countries, since data analysis shows that financial sector reform is more concentrated on regulation than supervision. Policy makers in the MENA countries need to focus more, in their financial sector reform, on bank supervision to realize the expected impact of bank regulation on financial development.

Keywords: Bank Regulation and Supervision, Financial Development, Financial Stability, Banking Reform, MENA Countries

JEL Classification: B26, F65, G18

Suggested Citation

Azmeh, Chadi, The Effects of Bank Regulation on Financial Development in the MENA Countries: The Supporting Role of Supervision (November 6, 2018). Iranian Economic Review 2018, Available at SSRN: https://ssrn.com/abstract=3887390

Chadi Azmeh (Contact Author)

International University for Science & Technology ( email )

Ghbageb
Daraa
Syria

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