Governance and Financial Development: Evidence from the Middle East and North Africa Region

Badry (ph.d) Hechmy ()

Econometric Research in Finance, 2016, vol. 1, issue 2, 115-127

Abstract: Since the 1990s, the promotion of good governance has been a priority for major international organizations such as the International Monetary Fund and the World Bank. This article aims to estimate the effect of institutional development on financial development in MENA countries during the period 1996 to 2013. Drawing on Demetriades and Luintel (1996) and Ito (2006), the econometric approach used is based on the GMM, the autocorrelation test for errors of Arellano and Bond (1991), and the over-identification test of Sargan for dynamic panel data. The results derived from this study show a considerable delay in financial development in MENA countries compared to several other emerging countries in Asia and Latin America. Furthermore, it shows a negative effect of institutional development on financial development. This unexpected relationship between these two variables has two explanations. First, the delusory level of institutional development of some countries in the region actually remains under the threshold beyond which it begins to positively affect the financial sector. Second, the political unrest experienced by the region during the study period has encouraged the informal financial sector to the detriment of the formal sector.

Keywords: financial deepening; governance; institutional development; MENA; GMM (search for similar items in EconPapers)
JEL-codes: C23 G28 G38 O16 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://erfin.org/journal/index.php/erfin/article/view/9 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sgh:erfinj:v:1:y:2016:i:2:p:115-127

DOI: 10.33119/ERFIN.2016.1.2.3

Access Statistics for this article

Econometric Research in Finance is currently edited by Dobromił Serwa and Piotr Wdowiński

More articles in Econometric Research in Finance from SGH Warsaw School of Economics, Collegium of Economic Analysis Contact information at EDIRC.
Bibliographic data for series maintained by Dobromił Serwa ().