Institutional Determinants of Financial Development in MENA Countries

Mondher Cherif and Christian Dreger

No 1422, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Developed and well regulated financial markets are usually seen as a precondition for an efficient allocation of resources and can foster long term economic growth. This paper explores the institutional determinants for financial development in the countries of the Middle East and North African (MENA) region. Institutional conditions are from the International Country Risk Guide. Paneleconometric techniques are applied to assess the development in the banking sector and the stock market. As a main finding, institutional conditions are important in both financial segments, even after controlling for standard macroeconomic determinants and fixed effects. For the banking sector, corruption seems to be most decisive. For the stock market, the impact of corruption and law and order appear to be relevant. While per capita income and inflation do not seem to play a vital role, openess to foreign trade is quite important for all areas of financial development. Hence, Overall, faster real economic integration is of key policy priority to improve financial development as a condition for higher GDP growth. Better law and enforcement practices and anti corruption policies are strategies to accompany this process.

Keywords: Financial development; banking and stock market; institutional quality (search for similar items in EconPapers)
JEL-codes: F15 G15 G28 (search for similar items in EconPapers)
Pages: 15 p.
Date: 2014
New Economics Papers: this item is included in nep-ara
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Institutional Determinants of Financial Development in MENA countries (2016)
Journal Article: Institutional Determinants of Financial Development in MENA countries (2016)
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