the effects of bank regulation on financial development in the mena countries: the supporting role of supervision

This study investigates the impact of bank regulation on financial development in 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 proxies for financial development. they consecutively represent the financial sector's size, activity, and stability. 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 vital for the mena countries since data analysis shows that financial sector reform concentrates more on regulation than supervision. policymakers in the mena countries need to focus more on bank supervision in their financial sector reform to realize the expected impact of bank regulation on financial development