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Uncertainty, Economic Reforms and Private Investment in the Middle East and North Africa

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  • Ahmet Faruk Aysan
  • G. Pang
  • M-A Veganzones-Varoudakis

Abstract

During the 1980s and the 1990s, private investment in the Middle East and North Africa (MENA) has on average shown a decreasing or stagnant trend. This contrasts with the situation of the Asian economies, where private investment has always been more dynamic. In this article, it is empirically shown for a panel of 39 developing economies among which four MENA countries - that in addition to the traditional determinants of investment such as the growth anticipations and the real interest rate - government policies explain MENA's low investment rate. Insufficient structural reforms, which have most of the time led to poor financial development and deficient trade openness have been a crucial factor for the deficit in private capital formation. The economic uncertainties of the region have represented another factor of the firm's decisions not to invest. These uncertainties consisted of the external debt burden and various measures of volatility.

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Paper provided by Bogazici University, Department of Economics in its series Working Papers with number 2006/07.

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Date of creation: Jul 2006
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Handle: RePEc:bou:wpaper:2006/07

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Citations

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Cited by:
  1. Ahmet Faruk Aysan & Zeynep Ersoy & M-A Veganzones-Varoudakis, 2007. "Does the Perception of Governance Institutions Matter for Private Investment: The Case of Middle East and North Africa," Working Papers, Bogazici University, Department of Economics 2007/03, Bogazici University, Department of Economics.
  2. Patrick Plane & Marie-Ange Veganzones & Tidiane Kinda, 2011. "Firm Productivity and Investment Climate in Developing Countries: How Does Middle East and North Africa Manufacturing Perform?," Working Papers halshs-00617574, HAL.
  3. Ahmet Faruk Aysan & M-A Veganzones-Varoudakis, 2007. "How Do Political and Governance Institutions Affect Private Investment Decisions? An Application to the Middle East and North Africa," Working Papers, Bogazici University, Department of Economics 2007/05, Bogazici University, Department of Economics.
  4. Marie-Ange VEGANZONES-VAROUDAKIS & Ahmet Faruk AYSAN & Zeynep ERSOY, 2008. "What Types of Perceived Governance Indicators Matter the Most for Private Investment in Middle East and North Africa," Working Papers 200802, CERDI.
  5. Mustapha Kamel Nabli, 2007. "Breaking the Barriers to Higher Economic Growth : Better Governance and Deeper Reforms in the Middle East and North Africa," World Bank Publications, The World Bank, number 6914, October.
  6. Mustafa Kilinç & Zübeyir Kilinç & M. Ibrahim Turhan, 2012. "Resilience of the Turkish Economy During the Global Financial Crisis of 2008," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 48(S5), pages 19-34, November.
  7. Kinda, Tidiane & Plane, Patrick & Veganzones-Varoudakis, Marie-Ange, 2009. "Firms'productive performance and the investment climate in developing economies : an application to MENA manufacturing," Policy Research Working Paper Series 4869, The World Bank.
  8. Amber Fatima & Abdul Waheed, 2011. "Effects of Macroeconomic Uncertainty on Investment and Economic Growth: Evidence from Pakistan," Transition Studies Review, Springer, vol. 18(1), pages 112-123, September.
  9. Kamel ABDELLAH ( GREThA, CNRS, UMR 5113 & ISG, UNIVERSITE DE TUNIS) & Dalila NICET-CHENAF (GREThA, CNRS, UMR 5113) & Eric ROUGIER (GREThA, CNRS, UMR 5113), 2012. "FDI and macroeconomic volatility: A close-up on the source countries," Cahiers du GREThA, Groupe de Recherche en Economie Théorique et Appliquée 2012-21, Groupe de Recherche en Economie Théorique et Appliquée.
  10. Dalila Nicet-Chenaf & Eric Rougier, 2014. "Source and host country volatility and FDI: A gravity analysis of European investment to Middle East and North Africa," Working Papers hal-00985795, HAL.

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