Title: The effect of banks' debt creation on price stability: evidence from Middle East and North Africa

Authors: Osman Sayid Hassan Musse; Hassanuddeen Abdul Aziz; Abdelghani Echchabi

Addresses: International Institute of Islamic Banking and Finance, International Islamic University Malaysia, Jalan Gombak, Kuala Lumpur, 53100, Malaysia ' Faculty of Economics and Management Sciences, Department of Finance, International Islamic University Malaysia, Jalan Gombak, Kuala Lumpur, 53100, Malaysia ' Faculty of Economics and Management Sciences, Department of Business Administration, International Islamic University Malaysia, Jalan Gombak, Kuala Lumpur, 53100, Malaysia

Abstract: The purpose of the study is to examine the possible influence of the current money creation process applied by the commercial banks through the fractional reserve system on the overall prices stability in the MENA countries. The study uses yearly data spanning from 2005 through 2011 for 15 MENA countries, and applies panel regression analysis based on the pooled data set. The results indicate that neither outstanding deposits nor outstanding loans do have a significant influence on inflation.

Keywords: inflation; bank deposits; bank loans; MENA; fractional reserve banking; debt creation; price stability; Middle East; North Africa; commercial banks.

DOI: 10.1504/MEJM.2014.060530

Middle East Journal of Management, 2014 Vol.1 No.3, pp.224 - 231

Received: 03 Sep 2013
Accepted: 04 Oct 2013
Published online: 17 Jun 2014 *

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