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The role of the financial sector and governance in promoting formal entrepreneurship in the mena region

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  • Rania S. Moaaz

    (Al-Ahram Canadian University)

Abstract

Formal entrepreneurship is a worldwide phenomenon that has not received enough attention from scholars in the Middle East and North Africa (MENA) economies. This study investigates the impact of governance quality and financial development on formal entrepreneurship in nine MENA economies. The study uses a panel data analysis via a twostage least squares (2SLS) estimation for the period 2010-18, as well as a principal component analysis to generate a composite governance index that captures all six dimensions of the governance indicators. The study concludes that governance and financial development have a positive and statistically significant impact on formal entrepreneurship. However, other statistically significant explanatory variables were found to negatively impact our dependent variable in MENA economies, which proves that the development of formal entrepreneurship is a multi-dimensional process that involves institutional quality, sound macroeconomic policies, adequate infrastructure, a stable currency regime, and a fair judicial system, among other factors.

Suggested Citation

  • Rania S. Moaaz, 2022. "The role of the financial sector and governance in promoting formal entrepreneurship in the mena region," Working Papers 1619, Economic Research Forum, revised 20 Dec 2022.
    • Handle: RePEc:erg:wpaper:1619
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