IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Does stock market liberalization spur financial and economic development in the MENA region?

  • Ben Naceur, Samy
  • Ghazouani, Samir
  • Omran, Mohammed

In order to investigate the impact of stock market liberalization on economic growth in the MENA region, we need to place our contribution in the economic growth literature. Our study is related to the literature on policy impacting growth rather than the debate on "convergence" between low-income and high-income countries which dominates the current research on economic growth. Our study is one of the few studies that focus on MENA countries. Several issues are addressed about the impact of stock market liberalization on economic growth. Using annual data from 11 MENA countries over the 1979-2005 period, the empirical results indicate that stock market liberalization has no effect on economic and investment growth, whereas the impact on stock market development is negative in the short run but turns positive in the long run. However, when we include certain pre-conditions for liberalizing the stock market, we find that a more developed stock market prior to liberalization; less government intervention and by not fully opening the economy to foreign trade, reinforces the positive impact of liberalization on stock market development. These results could have some important policy implications in which domestic financial reforms should precede policies that aim at liberalizing the stock market. This is not only easier and faster to accomplish, but from a policy sequencing perspective it pays to reform the trade regime before totally liberalizing the (portfolio component of the) capital account. In conclusion, reforms should first and foremost start in the domestic economy before opening it fully to foreign participation. Our results are robust to several specifications but they should be tentative since there may be some measurement error in the calculation of several variables which could downward bias the estimates. Journal of Comparative Economics 36 (4) (2008) 673-693.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 36 (2008)
Issue (Month): 4 (December)
Pages: 673-693

in new window

Handle: RePEc:eee:jcecon:v:36:y:2008:i:4:p:673-693
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Thomas F. Cooley & Gary D. Hansen, 1987. "The Inflation Tax in a Real Business Cycle Model," UCLA Economics Working Papers 496, UCLA Department of Economics.
  2. Norbert Funke & Nicola Fuchs-Schündeln, 2001. "Stock Market Liberalizations: Financial and Macroeconomic Implications," IMF Working Papers 01/193, International Monetary Fund.
  3. International Monetary Fund, 2004. "Financial Sector Development in the Middle East and North Africa," IMF Working Papers 04/201, International Monetary Fund.
  4. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
  5. Stanley Fischer, 2005. "IMF Essays from a Time of Crisis: The International Financial System, Stabilization, and Development," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262562162, June.
  6. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  7. Hali J. Edison & Michael W. Klein & Luca Ricci & Torsten Sloek, 2002. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," NBER Working Papers 9100, National Bureau of Economic Research, Inc.
  8. Levine, Ross & Zervos, Sara, 1998. "Capital Control Liberalization and Stock Market Development," World Development, Elsevier, vol. 26(7), pages 1169-1183, July.
  9. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2001. "Does Financial Liberalization Spur Growth?," NBER Working Papers 8245, National Bureau of Economic Research, Inc.
  10. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, 04.
  11. John H. Boyd & Bruce D. Smith, 1996. "The co-evolution of the real and financial sectors in the growth process," Working Papers 541, Federal Reserve Bank of Minneapolis.
  12. Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 221-248, April.
  13. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2003. "What Works in Securities Law?," NBER Working Papers 9882, National Bureau of Economic Research, Inc.
  14. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  15. Michael B. Devereux & Gregor W. Smith, 1991. "International Risk Sharing and Economic Growth," Working Papers 829, Queen's University, Department of Economics.
  16. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-88, June.
  17. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
  18. Raymond Fisman & Inessa Love, 2002. "Trade Credit, Financial Intermediary Development and Industry Growth," NBER Working Papers 8960, National Bureau of Economic Research, Inc.
  19. Neaime Simon, 2005. "Financial Market Integration and Macroeconomic Volatility in the MENA Region: An Empirical Investigation," Review of Middle East Economics and Finance, De Gruyter, vol. 3(3), pages 59-83, December.
  20. Samy Ben Naceur & Samir Ghazouani & Mohamed Omran, 2007. "The determinants of stock market development in the Middle-Eastern and North African region," Managerial Finance, Emerald Group Publishing, vol. 33(7), pages 477-489.
  21. Do, Quy-Toan & Levchenko, Andrei A., 2004. "Trade and financial development," Policy Research Working Paper Series 3347, The World Bank.
  22. Nazmi, Nader, 2005. "Deregulation, financial deepening and economic growth: The case of Latin America," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(2-3), pages 447-459, May.
  23. Yakov Amihud & Haim Mendelson & Beni Lauterbach, 1997. "Market Microstructure and Securities Values: Evidence from the Tel Aviv Stock Exchange," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-004, New York University, Leonard N. Stern School of Business-.
  24. Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September.
  25. Geert Bekaert & Campbell R. Harvey & Christian Lundblad & Stephan Siegel, 2004. "Global Growth Opportunities and Market Integration," NBER Working Papers 10990, National Bureau of Economic Research, Inc.
  26. Valeriano F. García & Lin Liu, 1999. "Macroeconomic Determinants of Stock Market Development," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 29-59, May.
  27. Sebastian Edwards, 1997. "Openness, Productivity and Growth: What Do We Really Know?," NBER Working Papers 5978, National Bureau of Economic Research, Inc.
  28. Huang, Yongfu & Temple, Jonathan, 2005. "Does External Trade Promote Financial Development?," CEPR Discussion Papers 5150, C.E.P.R. Discussion Papers.
  29. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
  30. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
  31. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2001. "Emerging equity markets and economic development," Journal of Development Economics, Elsevier, vol. 66(2), pages 465-504, December.
  32. B Ouattara, 2004. "Modelling the Long Run Determinants of Private Investment in Senegal," The School of Economics Discussion Paper Series 0413, Economics, The University of Manchester.
  33. Peter Blair Henry, 2000. "Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices," Journal of Finance, American Finance Association, vol. 55(2), pages 529-564, 04.
  34. Thorsten Beck & Ross Levine, 2002. "Stock Markets, Banks, and Growth: Panel Evidence," NBER Working Papers 9082, National Bureau of Economic Research, Inc.
  35. Demirguc-Kunt, Asli & Levine, Ross, 1995. "Stock market development and financial intermediaries : stylized facts," Policy Research Working Paper Series 1462, The World Bank.
  36. Bencivenga Valerie R. & Smith Bruce D. & Starr Ross M., 1995. "Transactions Costs, Technological Choice, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 67(1), pages 153-177, October.
  37. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-93, September.
  38. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
  39. Lahcen ACHY, 2004. "Financial liberalization, saving, investment and growth in MENA countries," Finance 0411004, EconWPA.
  40. Henry, Peter Blair, 2000. "Do stock market liberalizations cause investment booms?," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 301-334.
  41. Anastassios Gentzoglanis, 2007. "Financial integration, regulation and competitiveness in Middle East and North Africa countries," Managerial Finance, Emerald Group Publishing, vol. 33(7), pages 461-476.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jcecon:v:36:y:2008:i:4:p:673-693. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.