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Natural Resource Volatility and Inclusive Growth in MENA: The Moderating Effect of Financial Development and Institutions

Author

Listed:
  • Eslam A. Hassanein

    (, Beni Suef University)

  • Nourhan A. Hassan

    (nourhan-hassan@feps.edu.eg)

Abstract

This study investigates the nexus between natural resource volatility (NRV) and inclusive growth (IG) while examining the moderating impact of financial development (FD) and institutional quality (IQ) across 18 Middle East and North African (MENA) countries from 2002 to 2021. The empirical results —which are based on the two-step System Generalized Methods of Moments (SYS-GMM) estimation—reveal that NRV positively affects IG after controlling for moderation effects, implying that natural resources are a blessing in MENA. The results also indicate that the proposed moderators play a pivotal role in shaping the impact of volatility on IG. Institutions and volatility exhibit a synergistic relationship in promoting inclusivity in the MENA region. Nonetheless, volatility and FD are substitutive in promoting IG since FD (NRV) weakens the positive impact of volatility (FD). Overall, IQ and FD have a net positive impact on IG. However, the positive effect of FD is entirely negated at a volatility threshold of 34 percent, whereas IQ has a net positive effect beyond a volatility threshold of 17 percent. Additionally, the net positive impact of volatility on IG is nullified at an FD threshold of 80 percent. Policymakers in MENA are advised to be prudent with these thresholds while pursuing shared prosperity from their abundant natural resources

Suggested Citation

  • Eslam A. Hassanein & Nourhan A. Hassan, 2024. "Natural Resource Volatility and Inclusive Growth in MENA: The Moderating Effect of Financial Development and Institutions," Working Papers 1738, Economic Research Forum, revised 20 Oct 2024.
    • Handle: RePEc:erg:wpaper:1738
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