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Liquidity Creation and Economic Growth: Are They Monotonically Related? Evidence from MENA Countries

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  • Ali Almeshari

    (Putra Business School (PBS), University Putra Malaysia, Serdang 43400, Malaysia
    Banking Department, College of Economics and Administative Sciences, Imam Muhammad Ibn Saud University, Riyadh 11564, Saudi Arabia)

  • Mohamed Hisham Bin Dato Haji Yahya

    (Accounting and Finance Department, School of Business and Economics, University Putra Malaysia, Serdang 43400, Malaysia)

  • Fakarudin Bin Kamarudin

    (Accounting and Finance Department, School of Business and Economics, University Putra Malaysia, Serdang 43400, Malaysia)

  • Sha’ari Abd Hamid

    (Putra Business School (PBS), University Putra Malaysia, Serdang 43400, Malaysia)

Abstract

Over the period 2000–2019, we reexamine the connection between finance, as measured by one of the primary banking sector functions—liquidity creation (LC)—and economic growth (EG) in 10 MENA countries panel. In a scenario seen as a dynamic heterogeneous panel, pooled mean group estimates demonstrate that LC and EG may have a favourable long-run connection while also having no influence in the short-run. In addition, results reveal an inverted U-shaped link between LC and EG over the short-term and long-term. This indicates that an excess of financial resources may be counterproductive to development in MENA nations.

Suggested Citation

  • 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.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:1:p:24-:d:1032442
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