Arab countries like other developing countries have embarked on financial sector reforms since the early 1990s. The purpose of this study is to discuss and shed some light on the Arab countries’ financial sector institutional reform and their implications for economic development. The Arab financial sector reforms experience demonstrated that institutions have a vital role in and have positively influenced the process of Arab financial sector liberalization. It also emphasized the notion that strong and effective institutional reforms are very important ingredients for the success of financial sector reforms. For the most part, financial sector reforms have already brought about significant improvement in monetary and credit aggregates in many Arab countries. Financial sector reform has certainly had a noticeable impact on the cost of intermediation: real interest rates and gross interest margins. However, there is room for even more improvement in the coming years as competition enhancing measures and administrative costs reduction interventions are adopted.
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