Does Inflation Impact on Financial Sector Performance in the MENA Region? Panel Data Evidence

Review of Middle East Economics and Finance, Forthcoming

11 Pages Posted: 14 Dec 2005

See all articles by Sami Ben Naceur

Sami Ben Naceur

International Monetary Fund (IMF)

Samir Ghazouani

Higher School of Statistics and Information Analysis (ESSAI)

Abstract

This study gives some issues concerning the relationship between inflation and the financial sector performances for some MENA region countries. The negative association is confirmed through the estimation of a dynamic panel model using the GMM methodology. On the other hand, a threshold effect is also identified in order to show that negative effect of inflation on financial sector becomes effective once the rate of inflation exceeds some threshold. Globally, we find that inflation has a negative and significant incidence on financial sector development but with no evidence of thresholds levels even after controlling for simultaneity and omitted variable biases. In other words, we show that a marginal increase of inflation is harmless to stock market performance and banking sector development whatever the rate of inflation.

Keywords: cfinancial sector performances, inflation, dynamic panel data, MENA region.

Suggested Citation

Ben Naceur, Sami and Ghazouani, Samir, Does Inflation Impact on Financial Sector Performance in the MENA Region? Panel Data Evidence. Review of Middle East Economics and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=856344

Sami Ben Naceur (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Samir Ghazouani

Higher School of Statistics and Information Analysis (ESSAI) ( email )

6, Rue des métiers
Charguia II, 2035
Tunisia
+216 70 839 440 (Phone)
+216 70 838 170 (Fax)

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