IDEAS home Printed from https://ideas.repec.org/a/rss/jnljfe/v1i1p1.html
   My bibliography  Save this article

Does institutions quality matter for financial development and economic growth nexus? Another look at the evidence from MENA countries

Author

Listed:
  • Houssem Rachdi
  • Sami Mensi

Abstract

The relationship between financial development and economic growth remains a fundamental issue in the economics and finance literature. This paper examines this relationship by introducing institutional variables (law and order, corruption, external conflicts, socioeconomic conditions, investment profile and democratic accountability) of 13 Middle East and North African (MENA) countries over the 1990-2008 period using the generalized method of moments (GMM) system approach. This is what actually makes the outstanding aspect of this study. In fact, the empirical analysis reports the following results: when we use different measures of financial development and institutions as separate explanatory variables, most of the reported coefficients of liquid liabilities and central bank assets are positive and not significant, except for private credit, coefficients are negative and important. Some coefficients of institutional variables are positive and significant. Such results have been performed by using interaction between financial development and institutions. We find that most coefficients have a positive and insignificant impact on economic growth, except for democratic accountability, external conflicts and socioeconomic conditions when central bank assets is used like a proxy of financial development, coefficients are positive and significant.

Suggested Citation

  • Houssem Rachdi & Sami Mensi, 2013. "Does institutions quality matter for financial development and economic growth nexus? Another look at the evidence from MENA countries," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 1(1), pages 1-15.
  • Handle: RePEc:rss:jnljfe:v1i1p1
    as

    Download full text from publisher

    File URL: http://rassweb.org/admin/pages/ResearchPapers/Paper-1-fe_1496409746.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    2. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2010. "Financial liberalization, bureaucratic corruption and economic development," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1321-1339, November.
    3. Minea, Alexandru & Villieu, Patrick, 2010. "Financial development, institutional quality and maximizing-growth trade-off in government finance," Economic Modelling, Elsevier, vol. 27(1), pages 324-335, January.
    4. Aggarwal, Raj & Goodell, John W., 2010. "Financial markets versus institutions in European countries: Influence of culture and other national characteristics," International Business Review, Elsevier, vol. 19(5), pages 502-520, October.
    5. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    6. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    7. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 8-35, January.
    8. Thorsten Beck & Ross Levine, 2003. "Legal institutions and financial development," Policy Research Working Paper Series 3136, The World Bank.
    9. Marco Pagano & Paolo Volpin, 2001. "The Political Economy of Finance," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 502-519.
    10. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
    11. Arestis, Philip, et al, 2002. "The Impact of Financial Liberalization Policies on Financial Development: Evidence from Developing Economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 109-121, April.
    12. Casson, Mark C. & Della Giusta, Marina & Kambhampati, Uma S., 2010. "Formal and Informal Institutions and Development," World Development, Elsevier, vol. 38(2), pages 137-141, February.
    13. Levine, Ross, 1998. "The Legal Environment, Banks, and Long-Run Economic Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 596-613, August.
    14. Huang, Yongfu, 2010. "Political Institutions and Financial Development: An Empirical Study," World Development, Elsevier, vol. 38(12), pages 1667-1677, December.
    15. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    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:rss:jnljfe:v1i1p1. 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: (Danish Khalil). General contact details of provider: http://www.rassweb.org .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.