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Financial Development And Economic Growth: A New Empirical Evidence From The Mena Countries, 1989-2001

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  • AL-ZUBI, Khaled
  • AL-RJOUB,Samer
  • ABU-MHAREB,E

Abstract

In the last decade, Arab countries achieved significant progress in financial sector reforms in recognition that economic growth is often associated with increasing financial deepening. In light of these developments, it is important to investigate the relationship between financial development and economic growth. This study applies a model developed by Levine in 1997 using panel data for eleven Arab countries during the period 1980-2001. Then an improved version of a model is applied by adding new four financial indicators in the second stage of the empirical test to measure the effect of public credit ratios on economic growth. We apply a Hausman’s specification test to examine the fixed and random effects in the panel data. Under the application of Levine (1997) model, the results show that all financial indicators are insignificant and do not affect economic growth. The modified model shows that only pubic credit to domestic credit (PUBCR) indicator has a significant and positive effect on economic growth, indicating the dominance of the public sector in economic activities and the financial sectors are still underdevelopment and need more efforts to be able to exert its functions effectively in the Arab countries.

Suggested Citation

  • AL-ZUBI, Khaled & AL-RJOUB,Samer & ABU-MHAREB,E, 2006. "Financial Development And Economic Growth: A New Empirical Evidence From The Mena Countries, 1989-2001," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(3).
    • Handle: RePEc:eaa:aeinde:v:6:y:2006:i:3_11
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    References listed on IDEAS

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    Cited by:

    1. Ebru TOPCU Author- Workplace-Name: Nevsehir Haci Bektas Veli University, Department of Economics, Turkey, 2016. "Reexamining Finance-Growth Nexus: A New Literature Survey," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(Special I), pages 1-7, august.
    2. Cortina, Juan J. & Ismail, Soha & Schmukler, Sergio L., 2018. "Firm financing and growth in the Arab region," Economic Systems, Elsevier, vol. 42(2), pages 361-383.
    3. Ali Almeshari & Mohamed Hisham Bin Dato Haji Yahya & Fakarudin Bin Kamarudin & Sha’ari Abd Hamid, 2023. "Liquidity Creation and Economic Growth: Are They Monotonically Related? Evidence from MENA Countries," Economies, MDPI, vol. 11(1), pages 1-19, January.
    4. Serife Ozsahin & Dogan Uysal, 2017. "Financial Deepening and Economic Development in MENA Countries: Empirical Evidence from the Advanced Panel Method," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(4), pages 152-162, April.
    5. Ghassan Omet & Ibrahim Saif & Hadeel Yaseen, 2008. "Market Discipline and Deposit Insurance: Evidence from Some Middle Eastern Banks," Working Papers 391, Economic Research Forum, revised 01 Jan 2008.

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    More about this item

    Keywords

    Financial Development; Economic Growth; International;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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