Does Financial Market Liberalization Spur Economic and Financial Development in the MENA Region?
Posted: 9 Apr 2007 Last revised: 17 Apr 2014
Date Written: March 1, 2007
In order to investigate the impact of financial market liberalization on economic growth in the MENA region, we need to replace our contribution in the economic growth literature. Our project is related to the literature on policy impacting growth rather than the debate on "convergence" between low-income and high-income countries which dominates the current research on economic growth. Our study is the first to focus on MENA countries and to address several issues about the impact of financial market liberalization on economic growth. The results indicate that stock market liberalization has no effect on economic and investment growth whereas the impact on stock market and banking sector development is negative in the short run but positive in the long run. In addition, it seems that the long-run positive effect of stock market liberalization on equity market growth can be enhanced by a larger stock market, by a government that intervenes less, and by not fully opening the economy to foreign trade before liberalizing the stock market. Our results are robust to several specifications.
Keywords: Stock market Liberalization, Economic and Investment Growth, Financial and Banking Sector Development, Dynamic Panel Data, MENA Countries
JEL Classification: G21, G28
Suggested Citation: Suggested Citation