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The Causality Issues in the Finance and Growth Nexus: Emperical Evidence from Middle East and North African Countries

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  • Boulila Ghazi

    (FSEGT, Tunisia)

  • Trabelsi Mohamed

    (IHEC - Tunisia)

Abstract

This paper explores the causality issue between financial development and economic growth in the Middle East and North Africa (MENA) region for different periods ranging from 1960 to 2002. The empirical evidence presented in the paper, either with cointegration techniques or Granger causality tests provides support to the hypothesis that causality is running from the real to the financial sector. Moreover, there is a little support to the view that finance is a leading sector in the determination of long-run growth in the countries of the region. These findings might be associated with four features: (1) the strict control of the financial sector in these countries for long periods of time; (2) the delay in the implementation of financial reforms in these countries; (3) the persisting issues in reform implementation (non-performing loans in particular); and (4) the high information and transaction costs that prevent resource promotion and financial deepening even in the face of financial reform.

Suggested Citation

  • Boulila Ghazi & Trabelsi Mohamed, 2004. "The Causality Issues in the Finance and Growth Nexus: Emperical Evidence from Middle East and North African Countries," Review of Middle East Economics and Finance, De Gruyter, vol. 2(2), pages 35-50, August.
    • Handle: RePEc:bpj:rmeecf:v:2:y:2004:i:2:n:3
    DOI: 10.2202/1475-3693.1024
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    2. Doaa M. Salman & Eyad M. Atya, 2014. "What is the role of Financial Development and Energy Consumption on Economic Growth? New Evidence from North African Countries," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 3(1), pages 137-149, January.
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    9. Serife Ozsahin & Dogan Uysal, 2017. "Financial Deepening and Economic Development in MENA Countries: Empirical Evidence from the Advanced Panel Method," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(4), pages 152-162, April.
    10. Ben Jedidia, Khoutem & Boujelbène, Thouraya & Helali, Kamel, 2014. "Financial development and economic growth: New evidence from Tunisia," Journal of Policy Modeling, Elsevier, vol. 36(5), pages 883-898.
    11. Krishna Murari, 2017. "Financial Development–Economic Growth Nexus: Evidence from South Asian Middle-income Countries," Global Business Review, International Management Institute, vol. 18(4), pages 924-935, August.
    12. Kar, Muhsin & Nazlıoğlu, Şaban & Ağır, Hüseyin, 2011. "Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis," Economic Modelling, Elsevier, vol. 28(1), pages 685-693.
    13. Mohammed Ziaur Rehman & Nasir Ali & Najeeb Muhammad Nasir, 2015. "Financial Development, Savings and Economic Growth: Evidence from Bahrain Using VAR," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(2), pages 112-123, April.
    14. Antonio N. Bojanic, 2012. "The impact of financial development and trade on the economic growth of Bolivia," Journal of Applied Economics, Universidad del CEMA, vol. 15, pages 51-70, May.
    15. Arayssi, Mahmoud & Fakih, Ali, 2017. "Finance–growth nexus in a changing political region: How important was the Arab Spring?," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 106-123.
    16. Kirikkaleli, Dervis & Athari, Seyed Alireza, 2020. "Time-frequency co-movements between bank credit supply and economic growth in an emerging market: Does the bank ownership structure matter?," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    17. Assi, Ala Fathi & Zhakanova Isiksal, Aliya & Tursoy, Turgut, 2020. "Highlighting the connection between financial development and consumption of energy in countries with the highest economic freedom," Energy Policy, Elsevier, vol. 147(C).
    18. Ayadi, Rym & Arbak, Emrah & Ben-Naceur, Sami & De Groen, Willem Pieter, 2013. "Financial Development, Bank Efficiency and Economic Growth across the Mediterranean," CEPS Papers 7832, Centre for European Policy Studies.
    19. Imen Kouki & Nizar Harrathi, 2013. "Financial Development and Economic Growth in the North African Region," African Development Review, African Development Bank, vol. 25(4), pages 551-562, December.
    20. Zouheir Abida & Imen Mohamed Sghaier & Nahed Zghidi, 2015. "Financial Development and Economic Growth: Evidence from North African Countries," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 17-33, April.
    21. Lobna Bousrih, 2012. "Finance and Long Run Growth: The Role of Formal and Informal Institutions," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 1-13.
    22. İsmail Durak & Ergün Eroğlu, 2019. "The Nexus of Economic Growth, Trade Openness and Banking Sector Depth In OIC: An Application of Panel Data Analysis," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 7(2), pages 205-238, December.
    23. Khan, Shibli A. & Uddin, Gazi Salah & Alam, Md. Mahmudul, 2019. "An Empirical Study on Export, Import and Economic Growth in Bhutan," OSF Preprints pax9f, Center for Open Science.
    24. Omid Ranjbar & Zahra (Mila) Elmi & Hamid Reza Jahany, 2009. "Which is Leader in MENA region? Economic growth or financial development," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 14(1), pages 131-153, spring.
    25. Chen, Zhongfei & Huang, Wanjing & Zheng, Xian, 2019. "The decline in energy intensity: Does financial development matter?," Energy Policy, Elsevier, vol. 134(C).

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