IDEAS home Printed from https://ideas.repec.org/a/eee/jpolmo/v38y2016i6p1099-1117.html
   My bibliography  Save this article

Financial development and economic growth in MENA countries

Author

Listed:
  • Abid, Fathi
  • Bahloul, Slah
  • Mroua, Mourad

Abstract

The aim of this paper is twofold. It is first to evaluate the comparative performance of ten MENA (Middle East and North Africa) countries according to GDP growth and stock market return indicators using the non-parametric stochastic dominance approach. We will then use a multivariate vector autoregressive (VAR) model to investigate the shock transmission from the most performing country to other dominated countries. Results, over the period from June 2005 to December 2013, show that the dominance of MENA countries differs across indicators. Qatar and Morocco are respectively the most performing countries according to GDP growth and stock market return. Furthermore, the GDP growth response to Qatar GDP growth shock is statistically significant for all countries while, the stock market response to Morocco stock market shock is insignificant in Qatar, Saudi Arabia, and UAE. The response time of stock market return is also short when it is significant. Finally, this finding shows that the GDP growth dominance has the greater effect than the stock market dominance.

Suggested Citation

  • Abid, Fathi & Bahloul, Slah & Mroua, Mourad, 2016. "Financial development and economic growth in MENA countries," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1099-1117.
    • Handle: RePEc:eee:jpolmo:v:38:y:2016:i:6:p:1099-1117
    DOI: 10.1016/j.jpolmod.2016.06.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0161893816300588
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jpolmod.2016.06.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cheng, Ai-Ru & Jahan-Parvar, Mohammad R. & Rothman, Philip, 2010. "An empirical investigation of stock market behavior in the Middle East and North Africa," Journal of Empirical Finance, Elsevier, vol. 17(3), pages 413-427, June.
    2. Ritter, Jay R., 2005. "Economic growth and equity returns," Pacific-Basin Finance Journal, Elsevier, vol. 13(5), pages 489-503, November.
    3. Cooray, Arusha, 2010. "Do stock markets lead to economic growth?," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 448-460, July.
    4. Bishop, John A & Formby, John P & Thistle, Paul D, 1992. "Convergence of the South and Non-South Income Distributions, 1969-1979," American Economic Review, American Economic Association, vol. 82(1), pages 262-272, March.
    5. Beetsma, Roel & Giuliodori, Massimo, 2012. "The changing macroeconomic response to stock market volatility shocks," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 281-293.
    6. Kar, Muhsin & NazlIoglu, Saban & AgIr, Hüseyin, 2011. "Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis," Economic Modelling, Elsevier, vol. 28(1-2), pages 685-693, January.
    7. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    8. Lagoarde-Segot, Thomas & Lucey, Brian M., 2007. "International portfolio diversification: Is there a role for the Middle East and North Africa?," Journal of Multinational Financial Management, Elsevier, vol. 17(5), pages 401-416, December.
    9. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
    10. Russell Davidson & Jean-Yves Duclos, 2000. "Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality," Econometrica, Econometric Society, vol. 68(6), pages 1435-1464, November.
    11. Al-Khazali, Osamah & Lean, Hooi Hooi & Samet, Anis, 2014. "Do Islamic stock indexes outperform conventional stock indexes? A stochastic dominance approach," Pacific-Basin Finance Journal, Elsevier, vol. 28(C), pages 29-46.
    12. Dominic Gasbarro & Wing-Keung Wong & J. Kenton Zumwalt, 2007. "Stochastic Dominance Analysis of iShares," The European Journal of Finance, Taylor & Francis Journals, vol. 13(1), pages 89-101.
    13. Fong, Wai Mun & Wong, Wing Keung & Lean, Hooi Hooi, 2005. "International momentum strategies: a stochastic dominance approach," Journal of Financial Markets, Elsevier, vol. 8(1), pages 89-109, February.
    14. Ben Jedidia, Khoutem & Boujelbène, Thouraya & Helali, Kamel, 2014. "Financial development and economic growth: New evidence from Tunisia," Journal of Policy Modeling, Elsevier, vol. 36(5), pages 883-898.
    15. Andreano, M. Simona & Laureti, Lucio & Postiglione, Paolo, 2013. "Economic growth in MENA countries: Is there convergence of per-capita GDPs?," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 669-683.
    16. Sami Ben Naceur & Mondher Cherif & Magda Kandil, 2014. "What drives the development of the MENA financial sector?," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 14(4), pages 212-223, December.
    17. Fong, Wai Mun & Lean, Hooi Hooi & Wong, Wing Keung, 2008. "Stochastic dominance and behavior towards risk: The market for Internet stocks," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 194-208, October.
    18. Wong, Wing-Keung & Phoon, Kok Fai & Lean, Hooi Hooi, 2008. "Stochastic dominance analysis of Asian hedge funds," Pacific-Basin Finance Journal, Elsevier, vol. 16(3), pages 204-223, June.
    19. Yang, Yung Y. & Yi, Myung Hoon, 2008. "Does financial development cause economic growth? Implication for policy in Korea," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 827-840.
    20. Qiao, Zhuo & Wong, Wing-Keung & Fung, Joseph K.W., 2013. "Stochastic dominance relationships between stock and stock index futures markets: International evidence," Economic Modelling, Elsevier, vol. 33(C), pages 552-559.
    21. Dominic Gasbarro & Wing-Keung Wong & J. Kenton Zumwalt, 2007. "Stochastic Dominance Analysis of iShares," The European Journal of Finance, Taylor & Francis Journals, vol. 13(1), pages 89-101.
    22. Ramanathan, Ramakrishnan, 2006. "Evaluating the comparative performance of countries of the Middle East and North Africa: A DEA application," Socio-Economic Planning Sciences, Elsevier, vol. 40(2), pages 156-167, June.
    23. Abugri, Benjamin A., 2008. "Empirical relationship between macroeconomic volatility and stock returns: Evidence from Latin American markets," International Review of Financial Analysis, Elsevier, vol. 17(2), pages 396-410.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Borjigin, Sumuya & Yang, Yating & Yang, Xiaoguang & Sun, Leilei, 2018. "Econometric testing on linear and nonlinear dynamic relation between stock prices and macroeconomy in China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 493(C), pages 107-115.
    2. Tanin, Tauhidul Islam & Masih, Mansur, 2017. "Does economic freedom lead or lag economic growth? evidence from Bangladesh," MPRA Paper 79446, University Library of Munich, Germany.
    3. Nguyen, Yen Ngoc & Brown, Kym & Skully, Michael, 2019. "Impact of finance on growth: Does it vary with development levels or cyclical conditions?," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1195-1209.
    4. Nguyen Ngoc Thach & Bui Hoang Ngoc, 2021. "Impact of Economic Freedom on Corruption Revisited in ASEAN Countries: A Bayesian Hierarchical Mixed-Effects Analysis," Economies, MDPI, vol. 9(1), pages 1-16, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2013. "Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures," Documentos de Trabajo del ICAE 2013-31, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico, revised Aug 2013.
    2. Lean, Hooi Hooi & McAleer, Michael & Wong, Wing-Keung, 2015. "Preferences of risk-averse and risk-seeking investors for oil spot and futures before, during and after the Global Financial Crisis," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 204-216.
    3. Abdelbari El Khamlichi & Thi Hong Van Hoang & Wing‐keung Wong, 2016. "Is Gold Different for Islamic and Conventional Portfolios? A Sectorial Analysis," Post-Print hal-02965765, HAL.
    4. Lean, H.H. & McAleer, M.J. & Wong, W.-K., 2010. "Investor preferences for oil spot and futures based on mean-variance and stochastic dominance," Econometric Institute Research Papers EI 2010-37, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    5. Zhihui Lv & Amanda M. Y. Chu & Wing Keung Wong & Thomas C. Chiang, 2021. "The maximum-return-and-minimum-volatility effect: evidence from choosing risky and riskless assets to form a portfolio," Risk Management, Palgrave Macmillan, vol. 23(1), pages 97-122, June.
    6. Lam, Kin & Lean, Hooi Hooi & Wong, Wing-Keung, 2016. "Stochastic Dominance and Investors’ Behavior towards Risk: The Hong Kong Stocks and Futures Markets," MPRA Paper 74386, University Library of Munich, Germany.
    7. Qiao, Zhuo & Wong, Wing-Keung & Fung, Joseph K.W., 2013. "Stochastic dominance relationships between stock and stock index futures markets: International evidence," Economic Modelling, Elsevier, vol. 33(C), pages 552-559.
    8. Wong, W.-K. & Lean, H.H. & McAleer, M.J. & Tsai, F.-T., 2018. "Why did Warrant Markets Close in China but not Taiwan?," Econometric Institute Research Papers EI2018-22, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    9. Hoang, Thi-Hong-Van & Wong, Wing-Keung & Zhu, Zhenzhen, 2015. "Is gold different for risk-averse and risk-seeking investors? An empirical analysis of the Shanghai Gold Exchange," Economic Modelling, Elsevier, vol. 50(C), pages 200-211.
    10. Chia-Lin Chang & Michael McAleer & Wing-Keung Wong, 2018. "Big Data, Computational Science, Economics, Finance, Marketing, Management, and Psychology: Connections," JRFM, MDPI, vol. 11(1), pages 1-29, March.
    11. Zhidong Bai & Hua Li & Michael McAleer & Wing-Keung Wong, 2015. "Stochastic dominance statistics for risk averters and risk seekers: an analysis of stock preferences for USA and China," Quantitative Finance, Taylor & Francis Journals, vol. 15(5), pages 889-900, May.
    12. Guo, Xu & Wong, Wing-Keung & Zhu, Lixing, 2013. "Make Almost Stochastic Dominance really Almost," MPRA Paper 49745, University Library of Munich, Germany.
    13. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2010. "Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach," CIRJE F-Series CIRJE-F-705, CIRJE, Faculty of Economics, University of Tokyo.
    14. Ephraim Clark & Zhuo Qiao & Wing-Keung Wong, 2016. "Theories Of Risk: Testing Investor Behavior On The Taiwan Stock And Stock Index Futures Markets," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 907-924, April.
    15. Chang, C-L. & McAleer, M.J. & Wong, W.-K., 2016. "Management Science, Economics and Finance: A Connection," Econometric Institute Research Papers EI2016-26, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    16. Wing-Keung Wong & Hooi Hooi Lean & Michael McAleer & Feng-Tse Tsai, 2018. "Why Are Warrant Markets Sustained in Taiwan but Not in China?," Sustainability, MDPI, vol. 10(10), pages 1-17, October.
    17. Chia-Lin Chang & Michael McAleer & Wing-Keung Wong, 2018. "Decision Sciences, Economics, Finance, Business, Computing, and Big Data: Connections," Documentos de Trabajo del ICAE 2018-09, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    18. Chia-Lin Chang & Michael McAleer & Wing-Keung Wong, 2018. "Big Data, Computational Science, Economics, Finance, Marketing, Management, and Psychology: Connections," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 11(1), pages 1-29, March.
    19. Chia-Lin Chang & Michael McAleer & Wing-Keung Wong, 2018. "Decision Sciences, Economics, Finance, Business, Computing, And Big Data: Connections," Advances in Decision Sciences, Asia University, Taiwan, vol. 22(1), pages 36-94, December.
    20. Raymond H. Chan & Ephraim Clark & Xu Guo & Wing-Keung Wong, 2020. "New development on the third-order stochastic dominance for risk-averse and risk-seeking investors with application in risk management," Risk Management, Palgrave Macmillan, vol. 22(2), pages 108-132, June.

    More about this item

    Keywords

    GDP growth; Stock market return; Stochastic dominance; MENA region;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    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:eee:jpolmo:v:38:y:2016:i:6:p:1099-1117. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505735 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.