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Financialization, Growth, and the Resource Curse: Evidence from the MENA Region Erdal

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  • Erdal Özmen

    (Middle East Technical University)

  • Fatma Tasdemir

    (Sinop University)

Abstract

This study investigates whether the impacts of natural resource endowments (NREs) on growth are invariant on an endogenously estimated threshold level for international financial integration (IFI) in 13 Middle East and North Africa (MENA) economies over the 1970-2019 period. Our dynamic panel threshold estimation results suggest that NREs encourage growth up to a certain threshold level of IFI, beyond which the impact of NREs decreases for the sample of Gulf Cooperation Council (GCC) countries. This impact even becomes negative for the non-GCC economies. We also decompose IFI as resident-driven asset flows (capital outflows) and non-resident-driven liability flows (capital inflows) to investigate whether the direction of financial integration matters. We find that asset flows matter for the sample of GCC countries. There is a positive association between NREs and growth; however, this relationship diminishes with more capital outflows. Liability flows provide a data-driven estimated threshold for the non-GCC countries. NREs have a growth-enhancing effect in economies with fewer capital inflows but tend to dampen growth in economies with more capital inflows.

Suggested Citation

  • Erdal Özmen & Fatma Tasdemir, 2022. "Financialization, Growth, and the Resource Curse: Evidence from the MENA Region Erdal," Working Papers 1567, Economic Research Forum, revised 20 Aug 2022.
    • Handle: RePEc:erg:wpaper:1567
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