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Extending the Frontiers of Financial Development for Sustainability of the MENA States: The Roles of Resource Abundance and Institutional Quality

Author

Listed:
  • Stephen T. Onifade

    (Konya, Turkey)

  • Bright A. Gyamfi

    (Istanbul, Turkey)

  • Ilham Haouas

    (Abu Dhabi, UAE)

  • Simplice A. Asongu

    (Johannesburg, South Africa)

Abstract

Resource abundance characterizes economies within the MENA region from North Africa to the Middle East. As such, to improve financial development (FD) for regional economic sustainability, this study provides a comprehensive analysis of the roles of natural resources abundance and institutional quality indicators on the region’s FD while underscoring the inflationary levels and general economic growth trends amidst rising globalization. The adopted empirical strategy (CS-ARDL and AMG) is employed for potential cross-sectional dependency (CD) and slope homogeneity in the regional data spanning over two decades (2000-2020). Unlike the extant literature, two separate regional FD indicators were considered for an insightful analysis namely, banking financial services via domestic credit to private sector, and financial stability via the Z-score values showing the tendencies of default in a country's banking structure. Regardless of the FD indicator, the results reveal that natural resources, growth trends, and inflationary levels significantly spur long-run regional FD thereby invalidating the financial resource curse hypothesis in the region. Furthermore, both institutional quality levels and globalization produced detrimental impacts on FD levels. However, the interaction between institutional quality levels and natural resources shows a desirable FD-stimulating effect in the region, noticeably when FD is proxied by the Z-score. Thus, implying that stronger institutions are crucial for MENA’s overall financial stability vis-à -vis reduction in the risk of default in the banking system. Hence, policy recommendations including the strengthening of institutional capacities among others, were suggested to regional authorities towards harnessing resources for sustainable regional FD.

Suggested Citation

  • Stephen T. Onifade & Bright A. Gyamfi & Ilham Haouas & Simplice A. Asongu, 2023. "Extending the Frontiers of Financial Development for Sustainability of the MENA States: The Roles of Resource Abundance and Institutional Quality," Journal of Africa SEER Centre(ASC) 23/021, Africa SEER Centre(ASC).
    • Handle: RePEc:dbm:wpaper:23/021
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    Cited by:

    1. Hady O. Abozeid & Ahmed A. Elamer & Eman F. Attia, 2025. "Institutional Quality and Sustainable Firm Growth: Evidence From North African Countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(3), pages 4380-4392, June.
    2. Mohammed Musah & Bright Akwasi Gyamfi & Stephen Taiwo Onifade & Frank Gyimah Sackey, 2025. "Assessing the roles of green innovations and renewables in environmental sustainability of resource‐rich Sub‐Saharan African states: A financial development perspective," Natural Resources Forum, Blackwell Publishing, vol. 49(1), pages 461-490, February.
    3. Stephen Taiwo Onifade & Mohammed Musah & Bright Akwasi Gyamfi & Divine Q. Agozie & Evans Opoku‐Mensah, 2025. "Quest for SDG‐13: The Aptness of Green Investments and Information and Communications Technology (ICT) to Emission Mitigation Among Central‐African States," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(3), pages 3303-3330, June.
    4. Shiru Sun & Fei Meng & Muhammad Atif Nawaz & Sobia Hanif, 2025. "A re‐assessment of the Resource Curse Hypothesis in top resource‐rich developing countries: Fresh insights using method of moments quantile regression," Natural Resources Forum, Blackwell Publishing, vol. 49(3), pages 2436-2462, August.
    5. Clement Olalekan Olaniyi & Nicholas M. Odhiambo, 2025. "Does economic complexity provide antidotal pathways to evade the resource curse syndrome? A novel role for institutions," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(2), pages 3118-3142, April.
    6. Feng Wang & Tayyaba Rani, 2025. "Unlocking economic growth in South Asia: how energy shortages, digital trade, and financial development interact," Economic Change and Restructuring, Springer, vol. 58(5), pages 1-31, October.
    7. Wang, Chenxi & Wang, Deli & Deng, Xincai, 2024. "Role of digital government interfaces in mitigating the resource curse in selected OPEC countries," Resources Policy, Elsevier, vol. 93(C).
    8. Musah, Mohammed & Onifade, Stephen Taiwo & Ankrah, Isaac & Gyamfi, Bright Akwasi & Amoako, George Kofi, 2024. "Achieving net-zero emission target in Africa: Are sustainable energy innovations and financialization crucial for environmental sustainability of sub-Saharan African state?," Applied Energy, Elsevier, vol. 364(C).
    9. Thierry Mamadou Asngar, 2025. "Does financial development improve structural transformation in Africa? A long and short term analysis," SN Business & Economics, Springer, vol. 5(7), pages 1-26, July.
    10. Helen Onyeaka & Adenike A. Akinsemolu, 2025. "Advancing green education in MENA region: Challenges, opportunities and best practices," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(1), pages 1354-1365, February.

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    Keywords

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    JEL classification:

    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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