| Article Details : |
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| | | Article Name : | | | Role and Economic Impact of Interest Rate as a
Tool of Saudi Monetary Policy in Light of the
International Financial Crisis | | Author Name : | | | MAHMUD HOSNI AL-ATAIBI
| | Publisher : | | | Bridge Center | | Article URL : |  | | | Abstract : | | | This study aims to investigate the role of the interest rate in the
Saudi monetary policy and its impact on the Saudi economy during
the international financial crisis. The research methodology is
descriptive and analytical, and the secondary data collected for this
study include descriptive statistics, specifically, means, standard
deviations and percentages. The study concluded that changes in
interest rates by the Saudi Arabian Monetary Agency (SAMA) have
resulted in both positive and negative repercussions on the Saudi
economy. On the one hand, the reduction in interest rates, for the most
part, has resulted in low costs for credit, improved liquidity, increased
credit access for small- and medium-scale enterprises, and promoted
competitiveness with respect to exports. On the other hand, raising
interest rates has resulted in high costs of credit for companies,
improved the profitability of banks and increased the exchange rates
with respect to the Saudi riyal (SR). The Saudi monetary policy is
restricted by the following two factors: the pegging of the SR with the
US$, which has limited the role of interest rates in the Saudi monetary
policy, and the dual banking system of traditional and Islamic banks,
where traditional banks are affected by changes in interest rates while
Islamic banks are not because interest is prohibited by Sharia law. One of the alternatives for the Saudi monetary policy to be more
independent is to peg the SR to a basket of currencies. | | Keywords : | | | Interest Rate, Monetary Policy, Saudi Arabia |
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