IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v11y2023i12p290-d1291764.html
   My bibliography  Save this article

Modeling Finance–Growth Nexus in MENA Region Economies: A Panel Data Analysis

Author

Listed:
  • Abdelmonem Lotfy Mohamed Kamal

    (Department of Finance and Investment, Faculty of Business Administration, Economics, and Information System, Misr University for Science and Technology (MUST), 6th of October City, Giza 11556, Egypt)

  • Mostafa E. AboElsoud

    (Department of Economics, Faculty of Business Administration, Economics & Political Science, The British University in Egypt, Cairo 11837, Egypt
    Department of Economics, Faculty of Commerce, Suez Canal University, Ismailia 41522, Egypt)

  • Khaled Abdella

    (Department of Economics, Faculty of Business Administration, Economics & Political Science, The British University in Egypt, Cairo 11837, Egypt
    Department of Economics, Faculty of Management, Sadat Academy for Management Sciences, Cairo 11837, Egypt)

Abstract

The primary objective of this paper is to examine the relationship between finance and economic growth in a cohort of 16 economies within the MENA region spanning a four-decade period from 1980 to 2021. This study employs panel unit root and panel co-integration analyses to investigate this long-term nexus. The fully modified and dynamic Ordinary Least Squares (OLS) approaches are utilized to estimate the long-run coefficients. The findings underscore the existence of cross-sectional interdependence among these nations. Furthermore, Pedroni’s panel co-integration research robustly supports the idea of a long-term co-integrating relationship between financial development and economic growth. Our long-run panel estimations reveal a positive and statistically significant impact of financial development on GDP per capita income growth. In addition to this broad analysis, this paper conducts a detailed time-series examination focused on a specific country to validate the robustness of the results. These findings further substantiate the favorable influence of financial development on income growth in the majority of MENA nations. Notably, private sector participation in these economies is found to be alarmingly low. As a result, a significant policy implication of this study underscores the urgent need for policymakers to prioritize measures conducive to private sector expansion. Moreover, enhancing financial inclusion, addressing the crowd-out effect, and tackling non-performing loans are critical areas requiring attention within the MENA region. Furthermore, our research highlights the potential benefits of developing stock markets as part of an optimal strategy to enhance both economic and income growth rates. In conclusion, this study contributes valuable insights into the finance–growth nexus in the MENA region, emphasizing the importance of financial development as a driver of economic prosperity and the need for targeted policy initiatives to support private sector growth and financial stability.

Suggested Citation

  • Abdelmonem Lotfy Mohamed Kamal & Mostafa E. AboElsoud & Khaled Abdella, 2023. "Modeling Finance–Growth Nexus in MENA Region Economies: A Panel Data Analysis," Economies, MDPI, vol. 11(12), pages 1-18, November.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:12:p:290-:d:1291764
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/11/12/290/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7099/11/12/290/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    2. Narayan, Paresh Kumar & Narayan, Seema, 2013. "The short-run relationship between the financial system and economic growth: New evidence from regional panels," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 70-78.
    3. Joan Robinson, 1979. "The Generalisation of the General Theory and other Essays," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-16188-1.
    4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yan, Han, 2024. "Financial development, violence, and resource curse: How mineral resources are contributing towards growth of resource-rich countries," Resources Policy, Elsevier, vol. 89(C).
    2. Saeed, Muhammad Yasir & Ramzan, Muhammad & Hamid, Kashif, 2020. "Causal and Dynamic Link Between the Banking Sector and Economic Growth in Pakistan," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 27(01).
    3. Kais Mtar & Walid Belazreg, 2021. "Causal Nexus Between Innovation, Financial Development, and Economic Growth: the Case of OECD Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(1), pages 310-341, March.
    4. Clement Olalekan Olaniyi & Sunday Idowu Oladeji, 2021. "Moderating the effect of institutional quality on the finance–growth nexus: insights from West African countries," Economic Change and Restructuring, Springer, vol. 54(1), pages 43-74, February.
    5. Bangake, Chrysost & Eggoh, Jude C., 2011. "Further evidence on finance-growth causality: A panel data analysis," Economic Systems, Elsevier, vol. 35(2), pages 176-188, June.
    6. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    7. Bhavesh Garg & Pravakar Sahoo, 2021. "DO DIFFERENT TYPES OF CAPITAL INFLOWS HAVE DIFFERENTIAL IMPACT ON OUTPUT? Evidence from Time series and Panel Analysis," IEG Working Papers 443, Institute of Economic Growth.
    8. Wahidin, Deni & Akimov, Alexandr & Roca, Eduardo, 2021. "The impact of bond market development on economic growth before and after the global financial crisis: Evidence from developed and developing countries," International Review of Financial Analysis, Elsevier, vol. 77(C).
    9. Simplice A Asongu, 2013. "A Short-run Schumpeterian Trip to Embryonic African Monetary Zones," Economics Bulletin, AccessEcon, vol. 33(1), pages 859-873.
    10. Chow, Sheung Chi & Vieito, João Paulo & Wong, Wing Keung, 2019. "Do both demand-following and supply-leading theories hold true in developing countries?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 513(C), pages 536-554.
    11. Nagmi Moftah Aimer, 2020. "Renewable energy consumption, financial development and economic growth: Evidence from panel data for the Middle East and North African countries," Economics Bulletin, AccessEcon, vol. 40(3), pages 2058-2072.
    12. Halil D. Kaya, 2021. "The Impact Of The 2008 Global Crisis On The Efficiency Of The Financial System," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 86-97, October.
    13. Rudra P. Pradhan & Mak B. Arvin & Sahar Bahmani & Sara E. Bennett, 2017. "Broadband penetration, financial development, and economic growth nexus: evidence from the Arab League countries," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 10(2), pages 151-171, May.
    14. Ayhan KULOĞLU & Eyyup ECEVİT, 2017. "The Relationship Between Health Development Index And Financial Development Index: Evidence From High Income Countries," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 2(2), pages 83-95.
    15. Yongfu Huang, 2011. "Private investment and financial development in a globalized world," Empirical Economics, Springer, vol. 41(1), pages 43-56, August.
    16. Laurent Cavenaile & Christian Gengenbach & Franz Palm, 2014. "Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis," De Economist, Springer, vol. 162(1), pages 19-40, March.
    17. Donou-Adonsou, Ficawoyi & Sylwester, Kevin, 2017. "Growth effect of banks and microfinance: Evidence from developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 44-56.
    18. repec:rfh:jprjor:v:8:y:2022:i:3:p:81-97 is not listed on IDEAS
    19. Rajesh Sharma & Samaresh Bardhan, 2017. "Finance growth nexus across Indian states: evidences from panel cointegration and causality tests," Economic Change and Restructuring, Springer, vol. 50(1), pages 1-20, February.
    20. Omri, Anis, 2018. "Entrepreneurship, sectoral outputs and environmental improvement: International evidence," Technological Forecasting and Social Change, Elsevier, vol. 128(C), pages 46-55.
    21. Bittencourt, Manoel, 2012. "Financial development and economic growth in Latin America: Is Schumpeter right?," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 341-355.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:11:y:2023:i:12:p:290-:d:1291764. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.