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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
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    References listed on IDEAS

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    Cited by:

    1. Jung-Suk Yu & M. Kabir Hassan & Abdullah Mamun & Abul Hassan, 2014. "Financial Sectors Reform and Economic Growth in Morocco: An Empirical Analysis," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 13(1), pages 69-102, April.
    2. Shahbaz, Muhammad & Lean, Hooi Hooi, 2012. "Does financial development increase energy consumption? The role of industrialization and urbanization in Tunisia," Energy Policy, Elsevier, vol. 40(C), pages 473-479.
    3. Kar, Muhsin & NazlIoglu, Saban & AgIr, Hüseyin, 2011. "Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis," Economic Modelling, Elsevier, vol. 28(1-2), pages 685-693, January.
    4. Stojkoski, Viktor & Popova, Kristina, 2016. "Financial Development and Growth: Panel Cointegration Evidence from South-Eastern and Central Europe," MPRA Paper 69029, University Library of Munich, Germany.
    5. Suleiman Abu-Bader & Aamer S. Abu-Qarn, 2006. "Financial Development and Economic Growth Nexus:Time Series Evidence from Middle Eastern and North African Countries," Working Papers 0609, Ben-Gurion University of the Negev, Department of Economics.
    6. repec:eee:ecanpo:v:55:y:2017:i:c:p:106-123 is not listed on IDEAS
    7. 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.
    8. 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.
    9. 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.
    10. Omid Ranjbar & Zahra (Mila) Elmi & Hamid Reza Jahany, 2009. "Which is Leader in MENA region? Economic growth or financial development," Iranian Economic Review, Economics faculty of Tehran university, vol. 14(1), pages 131-153, spring.

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