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What drives the development of the MENA financial sector?

Author

Listed:
  • Sami Ben Naceur
  • Mondher Cherif
  • Magda Kandil

Abstract

We explore a wide range of macroeconomic, fiscal and institutional factors in order to assess their relevance as determinants of financial development in MENA countries. A first interesting result is that bank and non-bank development are affected differently by the determinants under consideration. For example, growth does not promote banking activity; it promotes development of stock market liquidity. While we find that better institutions, in general, have a positive and significant effect on financial development, some institutional aspects matter more than others do. We also present evidence on the impact of macroeconomic factors, such as investment, inflation, savings, trade openness and financial liberalization, as key determinants of financial development in the MENA region, further reflecting a sharp contrast between bank and non-bank activity. Our results are robust to different specifications and different estimation techniques.

Suggested Citation

  • Sami Ben Naceur & Mondher Cherif & Magda Kandil, 2014. "What drives the development of the MENA financial sector?," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 14(4), pages 212-223, December.
    • Handle: RePEc:bor:bistre:v:14:y:2014:i:4:p:212-223
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    More about this item

    Keywords

    Financial development; Institutional quality; MENA; Panel data;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • G - Financial Economics
    • O - Economic Development, Innovation, Technological Change, and Growth

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