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Financial Market Integration and Macroeconomic Volatility in the MENA Region: An Empirical Investigation

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  • Neaime Simon

    (Department of Economics, Institute of Financial Economics, American University of Beirut)

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    Abstract

    Using panel data regression models this study examines empirically the impact of regional and international financial integration on macroeconomic volatility in the developing economies of the MENA region over the period 1980–2002. Our empirical results indicate that financial openness is associated with an increase in consumption volatility, contrary to the notions of improved international risk-sharing opportunities through financial integration. Our empirical findings emphasize the role of sound fiscal and monetary policies in driving macroeconomic volatility. In regard to structural reforms, the development of the domestic financial sector is critical, as a high degree of financial sector development is significantly associated with lower macroeconomic volatility. We argue that enhancing regional financial integration might constitute a venue to circumvent the vulnerability of the small open MENA economies to external shocks, and a mean to enhance consumption smoothing opportunities, as well as international financial integration.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Review of Middle East Economics and Finance.

    Volume (Year): 3 (2005)
    Issue (Month): 3 (December)
    Pages: 59-83

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    Handle: RePEc:bpj:rmeecf:v:3:y:2005:i:3:n:5

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/rmeef

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    References

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    Cited by:
    1. Christophe Rault & Mohamed El Hedi AROURI, 2009. "On the influence of oil prices on stock markets: Evidence from panel analysis in GCC countries," William Davidson Institute Working Papers Series wp961, William Davidson Institute at the University of Michigan.
    2. Mohamed El Hedi Arouri & Duc Khuong Nguyen, 2010. "Time-varying characteristics of cross-market linkages with empirical application to Gulf stock markets," Managerial Finance, Emerald Group Publishing, vol. 36(1), pages 57-70, January.
    3. Emilio Espino & Julian Kozlowski & Juan M. Sánchez, 2013. "Regionalization vs. globalization," Working Papers 2013-002, Federal Reserve Bank of St. Louis.
    4. Christophe Rault & ohamed El Hedi AROURI, 2009. "Oil prices and stock markets: what drives what in the Gulf Corporation Council countries?," William Davidson Institute Working Papers Series wp960, William Davidson Institute at the University of Michigan.
    5. Hideaki Hirata & M. Ayhan Kose & Chris Otrok, . "Regionalization vs. Globalization," Working Paper 164456, Harvard University OpenScholar.
    6. Mohamed El Hedi Arouri & Christophe Rault, 2010. "Les effets des fluctuations du prix du pétrole sur les marchés boursiers dans les pays du Golfe," Working Papers hal-00507825, HAL.
    7. Ben Naceur, Samy & Ghazouani, Samir & Omran, Mohammed, 2008. "Does stock market liberalization spur financial and economic development in the MENA region?," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 673-693, December.

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