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Why economic growth has been weak in Arab countries: the role of exogenous shocks, economic policy failure and institutional deficiencies

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  • Nunnenkamp, Peter

Abstract

The gap between the per capita income of most Arab countries and that of advanced industrial countries has widened since the early 1990s. The economic growth performance of the Arab world has been weak by developing country standards, too. Yet, the diversity of growth patterns within this group defies easy generalizations on the reasons underlying the disappointing performance. In some cases, country-specific shocks played a role, notably for relatively high growth in Sudan (discovery of oil) and the poor performance of Jordan (embargo on neighboring Iraq). On the whole, however, influences beyond the immediate control of Arab policymakers contribute surprisingly little to the explanation of growth patterns. The relation between terms-of-trade developments and economic growth turns out to be extremely weak. Moreover, the IMF and the World Bank are hardly to blame for imposing ineffective policy conditionality on Arab countries, if only because the leverage of international financial institutions has remained limited in the region. Economic policy failure in Arab countries appears to be a more important reason for poor growth. Even though the region has partly fallen into line with the Washington Consensus, various Arab countries lag behind other developing countries when it comes to trimming the interventionist role of the state and integrating themselves into the global division of labor through trade and foreign direct investment (FDI). Nevertheless, the relation between macroeconomic conditions, factor accumulation as well as trade and FDI liberalization on the one hand and economic growth on the other hand remains elusive. This may be because reforms have not gone far enough and have remained fragmentary even in Arab countries with a relatively favorable growth performance. It can neither be ruled out, however, that some elements of the Washington Consensus have been less effective than widely expected in promoting growth. For example, the enclave character of F
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  • Nunnenkamp, Peter, 2005. "Why economic growth has been weak in Arab countries: the role of exogenous shocks, economic policy failure and institutional deficiencies," Open Access Publications from Kiel Institute for the World Economy 3970, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwkie:3970
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    Cited by:

    1. Bakari, Sayef & El Weriemmi, Malek, 2022. "Causality between Domestic Investment and Economic Growth in Arab Countries," MPRA Paper 113079, University Library of Munich, Germany.
    2. Looney Robert E, 2005. "Why Has the Middle East Been so Slow to Globalize?," Review of Middle East Economics and Finance, De Gruyter, vol. 3(3), pages 2-31, December.
    3. Benner, Joachim & Gern, Klaus-Jürgen & Meier, Carsten-Patrick & Scheide, Joachim, 2005. "Low-speed recovery in euroland," Kiel Discussion Papers 420, Kiel Institute for the World Economy (IfW Kiel).
    4. Nunnenkamp, Peter, 2005. "Die Wachstumsschwäche arabischer Länder: wo liegen die Gründe?," Open Access Publications from Kiel Institute for the World Economy 3786, Kiel Institute for the World Economy (IfW Kiel).

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