Is Finance-Growth Nexus Linear in Selected Countries of Middle East and Northern Africa?

Daouia Chebab (), Nur Syazwani Mazlan (), Wan Azman Saini Wan Ngah () and Chin Lee ()
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Daouia Chebab: Universiti Putra Malaysia, Malaysia, Postal: Ph.D Student in Economics, School of Business and Economics, Universiti Putra Malaysia, UPM Serdang, 43400,, Selangor, Malaysia.
Nur Syazwani Mazlan: Universiti Putra Malaysia, Malaysia, Postal: Senior Lecturer, School of Business and Economics, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia.
Wan Azman Saini Wan Ngah: Universiti Putra Malaysia, Malaysia, Postal: Associate Professor, School of Business and Economics, Universiti Putra Malaysia, UPM Serdang, 43400, Selangor
Authors registered in the RePEc Author Service: W.N.W Azman-Saini

Journal of Economic Integration, 2020, vol. 35, issue 2, 326-352

Abstract: The present study re-examines the impact of financial development on economic growth in resource-rich Middle East and North Africa (MENA) countries over 1987-2015. Although several studies investigate the finance-growth nexus, none emphasized the nature of this relationship in MENA. In the long run, an inverted U-shaped association between finance and growth is indicated when using pooled mean group estimations. However, the relationship is not significant in the short run. The outcomes suggest that financial development is significantly and positively affiliated with economic growth up to a certain level. After this turning point, additional financial development tends to adversely affect economic growth. The existence of an inverse U-shape association between financial development and economic growth was confirmed by the estimation of the U-test. The outcomes of our study are important to policymakers, in terms of optimizing the necessary and limit of financial development to ensure maximum benefit for the whole economy through the banking sector.

Keywords: Economic Growth; Financial Development; MENA; Non-linear; Pooled Mean Group Estimation (search for similar items in EconPapers)
JEL-codes: G21 O41 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0802

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