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Financial Liberalization, Banking Crises and Economic Growth: The Case of South Mediterranean Countries

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  • Ousama Ben Salha

    (Higher Institute of Management of Sousse (University of Sousse) and International Finance Group-Tunisia, TUNISIA)

  • Tarek Bouazizi

    (Faculty of Economics and Management of Tunis, University Tunis El Manar, TUNISIA)

  • Chaker Aloui

    (High Institute of Accounting and Business (University of Manouba) and International Finance Group-Tunisia, TUNISIA)

Abstract

The central aim of this paper is to empirically assess the effects of financial liberalization on economic growth in the presence of banking crises. Our empirical investigation is based on a dynamic panel model for a sample of 10 South Mediterranean countries during the period 1980-2005. Results suggest that equity market liberalization positively affects economic growth in these countries, especially in the period of fragility and banking crises. Capital account liberalization, however, has no significant effects. As expected, banking crises exert negative effects on economic growth. When we control for the presence of macroeconomic stability and appropriate openness sequencing, the anticipated effects of capital account liberalization become significant. We conclude that macroeconomic reforms and trade opening are both crucial prerequisites for the success of the capital account liberalization process.

Suggested Citation

  • Ousama Ben Salha & Tarek Bouazizi & Chaker Aloui, 2012. "Financial Liberalization, Banking Crises and Economic Growth: The Case of South Mediterranean Countries," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 12(3), pages 1-22, August.
    • Handle: RePEc:wsi:gejxxx:v:12:y:2012:i:03:n:1524-5861.1816
    DOI: 10.1515/1524-5861.1816
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    2. Aymen Ben Rejeb, 2013. "Volatility spillovers and contagion: an empirical analysis of structural changes in emerging market volatility," Economics Bulletin, AccessEcon, vol. 33(1), pages 56-71.
    3. Aymen Ben Rejeb & Adel Boughrara, 2015. "Financial integration in emerging market economies: Effects on volatility transmission and contagion," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 15(3), pages 161-179, September.

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