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Financial Deepening and Economic Development in MENA Countries: Empirical Evidence from the Advanced Panel Method

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  • Serife Ozsahin
  • Dogan Uysal

Abstract

This study analyses the effect of financial deepening on economic development in 12 MENA countries for the period between 2000 and 2014. Using three financial deepening indicators which are widely used in the literature, an econometric analysis was conducted through co-integration and estimation methods which take cross-sectional dependence into account. A long-term relationship between variables was revealed with Westerlund (2008) Durbin-Hausman panel co-integration test, and then, long-term coefficients were obtained using Pesaran (2006) CCE (Common Correlated Errors) estimator. Empirical findings point to a positive relationship between financial deepening indicators - domestic credit to private sector, domestic credit provided by private sector, and liquid liabilities of the financial system ratio ¨C and economic development. With this study, it was shown that the domestic credit to private sector causes economic growth for five countries, domestic credit provided by financial sector causes economic growth for one country, and liquid liabilities of the financial system causes economic growth for four countries.

Suggested Citation

  • 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.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:4:p:152-162
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    More about this item

    Keywords

    financial deepening; economic growth; panel co-integration; McKinnon-Shaw hypothesis; MENA countries;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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