CAPITAL ACCOUNT, INSTITUTIONAL QUALITY, AND ECONOMIC GROWTH IN MENA COUNTRIES: A GMM APPROACH

Mohamed Ilyes Gritli and Fatma Charfi
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Mohamed Ilyes Gritli: University of Tunis El Manar, Faculty of Economic Sciences and Management of Tunis International and Regional Integration Laboratory, 2092 Tunis, Tunisia†University of Pau (UPPA), CATT, 64016 Pau, France

Annals of Financial Economics (AFE), 2016, vol. 11, issue 04, 1-23

Abstract: Despite the diversity of theoretical and empirical studies, the question of capital account–economic growth relationship remains a controversial issue. The aim of the paper is to complete the existing evidence focusing on Middle East and North Africa (MENA) countries, while taking into account the institutional quality. In this context, various estimates were made by generalized method of moments (GMM) over the period of 1986–2012 for 11 countries. The results show that corruption and democratic accountability have a significant and negative impact on economic growth if capital account liberalization is enacted. However, the interaction term of bureaucracy quality and financial openness has a significant and positive impact on economic growth. These findings therefore show that the benefits of capital account liberalization are not unconditional, but are likely to depend upon the environment in which the liberalization occurs. Our paper contributes to the recent policy debates on the merits and demerits of capital account liberalization.

Keywords: Capital account; economic growth; institutional quality; MENA countries; GMM (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S2010495216500160

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