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This study aims at investigating the extent of interaction between monetary policy and macro-prudential policy in Jordan during the period (2005-2015) using the Vector Error Correction Model (VECM) to check the presence of short-term and long-term impacts of the monetary policy tools in general on the accumulation of systemic risks in the banking s...
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Context 1
... to the global financial crisis, there were no linkages (i.e. coordination) between the major economic policies (monetary and fiscal policies) and the micro-prudential policy (financial supervision). Put differently, economic risks and financial risks were independent. Economic policymaking does not take into consideration the financial risks that might emerge through the implementation of the policies, aiming solely at achieving price stability and maintaining sustainable economic growth. Similarly, the micro-prudential policy (financial supervision) does not count for economic risks, targeting to achieve its own objective of maintaining the soundness of financial institutions on individual level only, but not collectively, therefore, the risk that the financial system as a whole might be vulnerable to and affected adversely by, the systemic risk, was not taken into consideration (Figure ...
Context 2
... macro-prudential policy mainly targets to control and supervise the ability of banks in extending excessive credit using the suitable instrument -during boost periods. Thereby helps protect financial stability and economy from severe losses. The comparison of policies and objectives before and after the global financial crisis as shown in Figure 1 and Figure 2 respectively clearly shows the important role of Macro-prudential policy. Before the emergence of this policy, the micro-prudential policy was the actor in achieving its major goal of maintaining financial stability on the individual institutional level regardless of the economic policies in general and monetary policy in particular. Similarly, the monetary policy directed toward achieving price stability and promoting economic activity regardless of the performance or stance of the micro-prudential ...
Context 3
... policymaking does not take into consideration the financial risks that might emerge through the implementation of the policies, aiming solely at achieving price stability and maintaining sustainable economic growth. Similarly, the micro-prudential policy (financial supervision) does not count for economic risks, targeting to achieve its own objective of maintaining the soundness of financial institutions on individual level only, but not collectively, therefore, the risk that the financial system as a whole might be vulnerable to and affected adversely by, the systemic risk, was not taken into consideration (Figure 1). ...
Context 4
... helps protect financial stability and economy from severe losses. The comparison of policies and objectives before and after the global financial crisis as shown in Figure 1 and Figure 2 respectively clearly shows the important role of Macro-prudential policy. Before the emergence of this policy, the micro-prudential policy was the actor in achieving its major goal of maintaining financial stability on the individual institutional level regardless of the economic policies in general and monetary policy in particular. ...
Context 5
... to the global financial crisis, there were no linkages (i.e. coordination) between the major economic policies (monetary and fiscal policies) and the micro-prudential policy (financial supervision). Put differently, economic risks and financial risks were independent. Economic policymaking does not take into consideration the financial risks that might emerge through the implementation of the policies, aiming solely at achieving price stability and maintaining sustainable economic growth. Similarly, the micro-prudential policy (financial supervision) does not count for economic risks, targeting to achieve its own objective of maintaining the soundness of financial institutions on individual level only, but not collectively, therefore, the risk that the financial system as a whole might be vulnerable to and affected adversely by, the systemic risk, was not taken into consideration (Figure ...
Context 6
... macro-prudential policy mainly targets to control and supervise the ability of banks in extending excessive credit using the suitable instrument -during boost periods. Thereby helps protect financial stability and economy from severe losses. The comparison of policies and objectives before and after the global financial crisis as shown in Figure 1 and Figure 2 respectively clearly shows the important role of Macro-prudential policy. Before the emergence of this policy, the micro-prudential policy was the actor in achieving its major goal of maintaining financial stability on the individual institutional level regardless of the economic policies in general and monetary policy in particular. Similarly, the monetary policy directed toward achieving price stability and promoting economic activity regardless of the performance or stance of the micro-prudential ...
Similar publications
This study aims at investigating the extent of interaction between monetary policy and macro-
prudential policy in Jordan during the period (2005-2015) using the Vector Error Correction
Model (VECM) to check the presence of short-term and long-term impacts of the monetary policy
tools in general on the accumulation of systemic risks in the banking...
This study is an empirical attempt to investigate the nexus between macro-prudential banking regulation, interest rate spread and monetary policy in South Africa. The effectiveness of monetary policy and alarmingly wide interest rate spread has been a contentious issue in the corridors of central banks across the globe in this lifetime. This has be...
This study aims to investigate the effectiveness of macroprudential policies in mitigating the systemic risk in Indonesia. The study uses quantitative descriptive analysis with the Vector Error Correction Model (VECM) and emphasizes on the impact of two macroprudential instruments applied in Indonesia; Macroprudential Liquidity Buffer (MLB) and Cou...
Citations
... It should be noted that the size of credit facilities may be affected in general by macroprudential policy tools used to reduce systemic risks, so the use of any of these tools may reduce the impact of NPLs on the stability of the bank, for example, by setting a cap on the debt-to-income ratio that will restrict the ability of customers to borrow, enhance responsible finance, and thus reflect positively on financial stability (Obeid, 2023c). Also, the easing of those restrictions will lead banks to expand borrowing, especially if this is accompanied by an accommodative monetary policy (Obeid and Awad, 2018). ...
The paper presents an investigation of the dialectical relationship between banking concentration and the stability of the banking sector, using data from twelve Arab countries for the period 2014-2019 in the framework of a dynamic panel data model. The findings show that the banking sector in the Arab countries follows the "Concentration-Stability" hypothesis. That is, banking concentration has a significant positive impact on bank stability. The paper explains that this result is due to two main reasons. The first reason is that large banks tend to manage their assets and capital more efficiently compared to smaller banks, while the second reason is that systemically important banks (DSIBs) are subject to additional quantitative and qualitative regulatory requirements, especially after the global financial crisis in 2008. The paper also reveals that economic growth has a significant positive effect on bank stability, while credit risk has a significant negative impact on bank stability. The paper suggests encouraging the merger of small banks, as this leads to enhancing their operational efficiency, strengthening their financial positions, and supporting their ability to absorb potential shocks.
... A one percent increase in the real GDP growth rate results in a 0.492 unit increase in the CAR, which is expected because, during economic prosperity times, banks build up their capital buffers in preparation for stress periods, and to enhance their abilities to face any unexpected financial or economic crises (Asarkaya & Ozcan, 2007;Obeid & Awad, 2017). Also, this result shows the importance of continuous evaluation of the interactions between economic and macroprudential policies and the side effects on the objectives of each (Obeid & Awad, 2018). ...
The capital adequacy ratio is one of the most important indicators used to assess the ability of the banking sector to absorb shocks. Therefore, central banks have paid attention to the importance of monitoring this ratio on an ongoing basis, given the vital role of the banking sector in supporting the economy. In this paper, we investigate the banking and economic factors that could affect the capital adequacy ratio in the Arab banking sector, by using dynamic panel data model for a panel of 35 banks spread across seven Arab countries during the period 2015 to 2020. The results show that there is a positive and significant relationship between credit risk (ratio of non-performing loans to total loans) and the size of the bank on the one hand, and capital adequacy ratio on the other hand. There is also a negative significant relationship between bank profitability (return on assets) and capital adequacy ratio, while there is no significant relationship between dynamic provisions and capital adequacy ratio. Finally, regarding the role of economic variables, the study shows that the real GDP growth rate has a significant positive impact on the capital adequacy ratio in the Arab region.
... For instance, high interest rates may increase the cost of loans and the disposable income for the bank`s clients, thus reducing the banks' profits (Obeid, 2022b). Consequently, an increase in the interest rate may reduce the solvency of bank clients, resulting in a decrease in the assets quality, which in turn increases the financial burden on banks to cover credit losses (Obeid & Awad, 2018;Jouini & Obeid, 2020). Second, we include the economic growth rate (GR), which has a positive potential impact on the return on assets. ...
The objective of this study is to examine, using a dynamic panel data framework, the effects of financial inclusion on the performance of the banking sector, as measured by the return on assets, for eleven Arab countries during the period 2012-2019. In addition to financial inclusion and technologies indicators, our analysis incorporates banking and macroeconomic variables. The study reveals that bank-specific variables have a greater impact on the profitability of banks than macroeconomic variables. The results show that there is a positive and significant impact of the bank’s assets, the bank solvency, the credit growth, the economic growth rate, and the inflation rate on the profitability of the banking sector. However, the return on assets is unaffected by fluctuations in nonperforming loans and the interbank lending rate. Regarding indicators of financial inclusion and technologies, the study finds no evidence of significant effects of automated teller machines (ATM) distribution and bank branch density on return on assets.
... As for liquid assets, it is expected to have a negative relationship with the probability of bank bankruptcy, as the presence of high levels of liquid assets enhances the bank's ability to meet its obligations and enables it to employ its liquidity with less risks, thus reducing the chances of bank bankruptcy (Zaghdoudi, 2013). Finally, as for the GDP variable, it is expected to have a negative relationship with the possibility of bank bankruptcy, since the stable economic environment encourages investors to borrow from banks, as well as may increase the income of the individual and corporate sectors, which will positively reflect on the quality of the credit portfolio, and thus improve financial positions for banks (Kadri & Mayes, 2009;Obeid & Awad, 2018). ...
... The results showed that all banking variables were statistically significant, while it was not proven whether there is any relationship between GDP growth and bank bankruptcy. However, it must be emphasized the importance of taking economic risks into account when measuring the risks of the financial system (Obeid & Awad, 2018). With regard to banking variables, the results showed that a high percentage of NPL has a negative relationship with the probability of the bank's survival, meaning that a high percentage of NPL may lead to a higher probability of bank failure, especially in the absence of sufficient provisions at the bank. ...
The global financial crisis of 2008 taught the biggest lesson of anticipating a financial crisis. The current study aimed to highlight the importance of central banks to build early warning systems to reduce the costs of resolution procedures of weak banks. The data was obtained from published annual reports and balance sheets of 60 commercial banks in the Arab region for the period 2000-2010. Using the logistic regression model to predict the performance of banks or anticipating the possibility of bank failure and build an early warning system, the study identified a few financial indicators such as Capital Adequacy Ratio (CAR); Liquidity (LIQ); Cost to Income Ratio CIR; Return On. Assets (ROA); and Non-Performing Loans (NPL). The impact of the GDP variable on bank`s failure was also determined to capture economic risks. The results showed that financial soundness indicators (FSI) can be used efficiently to predict bank failure, that the variables of ROA and CAR had the greatest impact on the probability of the bank's survival, while no statistical significance was seen for the GDP variable. The paper recommends the importance of the financial stability and banking supervision departments to build early warning systems. The study would provide useful insights to both household and corporate sectors to look for early warning signs that predict the performance of the banking sector in the Arab countries. The FSIs suggested in the study would also play a prominent role in predicting the success or failure of banks in the Arab region.
... In this section, an overview of some of the macroprudential tools that are used toadjust the systemic risks arising from the household sector will be introduced, taking into account that there are other factors that may increase the efficiency of these tools, for example the lack of coordination between the macroprudential policy and the monetary and fiscal policies (Obeid and Awad, 2018;Obeid 2018). ...
The paper examined the potential relationship between household credit risk and its impact on the non-performing loans ratio (NPLs), in ten Arab countries during the period (2015-2020), using the difference Generalized Method of Moments (GMM), the household credit was measured through the household loans to total credit ratio, in a manner that takes into account the existence of prudential tools that mitigate these risks and limit the systemic risks that may arise from this sector, as variables were used that measure the effect of activating or tightening the Debt-to-Income ratio (DTI) and the Loan to the Value ratio (LTV). The results showed that the increase in the household loans to the total loans ratio has a positive relationship with the bank default rate (NPLs ratio), and the results also showed that the macroprudential policy tools play an important role in reducing these risks. While there was a negative relationship between the rate of return on assets (ROA) and the size of the bank on the one hand, and the default rate on the other. While there was no statistically significant relationship between the interbank interest rate and the default rate, as well as the inflation rate, but regarding the real gross domestic product (GDP) growth rate, the results showed a negative relationship between this variable and credit risk. The paper recommended the need to enhance responsible finance, and the deliberate appetite for lending to individuals based on customer risks, and to benefit from the credit database of credit bureaus or credit information companies to rationalize credit and grant loans based on customer risks.
... The increase of customers' expectations on the speed to fulfil their requirements have forced many organizations to act and respond faster, and to be more flexible to changes (Agus, 2011). Traditional manufacturing approaches are no longer sufficient for a firm to secure competitive advantage in this drastically changing environment (González-Benito, 2007; Nxumalo and Naidoo, 2018; Obeid and Awad, 2018). Concurrently, rapid changes in the world's technology has shortened the life cycle of the product; with customer demand for more innovative products with higher value, creating a flexible organization becomes essential to cope for rapid changes (Judi and Beach, 2008); Decreasing of profit margins, increasing inventory levels to cope with uncertainty, increasing global competition, and increasing the speed of technological changes (Judi and Beach, 2008) have further amplified the need for flexibility. ...
Purpose: The current study is interested in exploring the nexus between manufacturing flexibility supply chain practices and manufacturing performance of Indonesian manufacturing firms. Multidimensionality of manufacturing flexibility within the function of manufacturing is generally accepted by past researchers and its importance honoured. Methodology: Employing the survey-based methodology, the SEM-PLS technique is used to test the hypothesized relationships. So, the current study has used SEM-PLS as a statistical tool to answer the research questions raised in this study and research objectives envisaged in the current study. Results: The complexity of manufacturing flexibility has made this concept difficult to comprehend yet delimit. To date, agreement on how to practice this concept has not yet been resolved. The findings of the study have provided support to the theoretical foundation and proposed hypothesis of the current study. Current study will be helpful for policymakers and practitioners in understanding the issues related to supply chain risk, supply chain integration and supply chain agility. In the author's knowledge this is among very few pioneering studies on this issue.
... According to Hofstede, G. (1980), there are different factors for explaining national cultures. Hence, though an individual may share similar demographic variable still may act differently depending on their culture and behaviour (Doyle, P. 2008;Obeid & Awad 2018). As Malaysia is a very different country in terms of it was built up with multi-ethnic, therefore the results of findings may differ from other countries where consist of only one core ethnic group. ...
The aim of this research is to provide a framework for credit card providers to develop a better marketing strategy as well as business related to credit transaction by providing better understanding towards the effect of current individual demographic variable towards credit card ownership and usage in Malaysia. This research discusses the effect of significant demographic variables and ownership on the usage of credit card in Malaysia. The impacts of four key demographic variables are age, gender, education level, and income level on ownership and usage of credit card among credit cardholders in Malaysia. Whereas the income level has the strongest relationship among other demographic variables, it has to be taken into consideration by the credit card providers not just the ownership of credit card as well as the demographic variables while developing market strategy, particularly in Malaysia.
... Also, there are some aspects that must be considered when designing a tax system, for example, (Güneş & Polat, 2016) focus on the relationship between democracy and economic development over the concept of taxation. Furthermore, (Obeid & Awad, 2018) shows that the 2008 global financial crisis highlighted the importance of maintaining financial stability. The discussion of monetary and fiscal policies is no longer separated from policies related to policies targeting to control systemic risk. ...
This paper focuses on discussing the principle of "ʺVertical Tax Equity"ʺ, theoretically and mathematically, by comparing between three rules: absolute sacrifice, proportional sacrifice, and marginal sacrifice. Vertical tax equity is based essentially on two principles: "ʺAbility to pay"ʺ and "The amount of sacrifice" or "Loss of welfare" for every taxpayer. The study showed and illustrated how to make a comparison between the three rules above which may contribute to the design of the optimal tax system, and how governments may determine the "ʺfair share"ʺ for taxpayers`taxpayers`contributions in its spending. Graphs and mathematical equations were used to illustrate how to find the optimal tax rate based on the loss of the welfare of taxpayers.
تهدف هذه الدراسة الى دراسة العلاقة بين السياسة الاحترازية الكلية والسياسات الاقتصادية الاخرى لاسيما السياستين النقدية والمالية
