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Financial Development, Bank Efficiency and Economic Growth across the Mediterranean

Rym Ayadi (), Emrah Arbak (), Sami Ben-Naceur and Willem Pieter De Groen
Authors registered in the RePEc Author Service: Ben Naceur ()

CEPS Papers from Centre for European Policy Studies

Abstract: This MEDPRO Technical Report explores the relationship between financial sector development and economic growth, using a sample of northern and southern Mediterranean countries for the years 1985-2009. The authors included several variables to measure the development of the financial sector to account both for quantity and quality effects. The results indicate that credit to the private sector and bank deposits are negatively associated with growth, which confirms deficiencies in credit allocation in the region and suggests weak financial regulation and supervision. On the stock market side, the results seem to indicate that stock market size and liquidity play a significant role in growth, especially when accounting for the quality of an institution. Investment, whether domestic or in the form of FDI, contributes significantly to economic growth. Stronger institutions and low inflation are key growth factors. Initial GDP has a persistently and significantly negative impact on growth, which implies that poorer countries are catching up richer countries in terms of economic growth.

Pages: 17 pages
Date: 2013-03
New Economics Papers: this item is included in nep-ara, nep-eff and nep-fdg
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