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McKinnon’s Complementarity Hypothesis: Empirical Evidence for the Arab Maghrebean Countries


  • Amaira Bouzid

    () (University of Tunisia)


This study aims to verify the financial repression theory’s assumptions for the Arabic Maghrebean countries during a time period ranging from 1973 to 2003. First, the interest rates in the Arab Maghrebean countries were regulated. Moreover, the low and administered interest rate discourages savings, retards the efficient allocation resources, increases the segmentation of financial markets, constrains investment and in term lowers the economic growth rate. This paper is to provide empirical evidence concerning neoliberal hypothesis for Tunisia, Algeria and Morocco. The money demand and investment function are estimated in static long-run formulations (cointegration regression) as well as in the dynamic formulation (VECM).

Suggested Citation

  • Amaira Bouzid, 2012. "McKinnon’s Complementarity Hypothesis: Empirical Evidence for the Arab Maghrebean Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(44), pages 23-36, June.
  • Handle: RePEc:rej:journl:v:15:y:2012:i:44:p:23-36

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    References listed on IDEAS

    1. Galindo, Arturo & Schiantarelli, Fabio & Weiss, Andrew, 2007. "Does financial liberalization improve the allocation of investment?: Micro-evidence from developing countries," Journal of Development Economics, Elsevier, vol. 83(2), pages 562-587, July.
    2. Kapur, Basant K, 1976. "Alternative Stabilization Policies for Less-developed Economies," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 777-795, August.
    3. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    4. Thornton, John & Poudyal, Sri Ram, 1990. "Money and Capital in Economic Development: A Test of the McKinnon Hypothesis for Nepal," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(3), pages 395-399, August.
    5. Donald J. Mathieson, 1979. "Financial Reform and Capital Flows in a Developing Economy (Réforme financière et flux de capitaux dans une économie en développement) (La reforma financiera y los flujos de capital en una economÃ," IMF Staff Papers, Palgrave Macmillan, vol. 26(3), pages 450-489, September.
    6. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    7. Fry, Maxwell J, 1978. "Money and Capital or Financial Deepening in Economic Development?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(4), pages 464-475, November.
    8. Mathieson, Donald J., 1980. "Financial reform and stabilization policy in a developing economy," Journal of Development Economics, Elsevier, vol. 7(3), pages 359-395, September.
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    Cited by:

    1. Muhammad Mehtab AZEEM & Ayub MOHAMMAD, 2015. "Money and Physical Capital Relationship: McKinnon’s Complementarity Hypothesis on Turkey’s Economy," Expert Journal of Finance, Sprint Investify, vol. 3(1), pages 21-30.
    2. Bozhechkova, A.V. & Sinelnikova-Muryleva, Elena Vladimirovna, 2016. "The Impact of Higher Interest Rates on Loans to the Economic Growth of the Russian Federation in the Current Environment," Working Papers 21310, Russian Presidential Academy of National Economy and Public Administration.

    More about this item


    Neo-liberal Hypothesis; Cointegration Test; Vectoriel Error Correction Model; Arab Maghrebean Countries;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


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