Financial development and the oil curse: Evidence from Algeria

Farah Elias Elhannani, Abou Bakr Boussalem and Mohamed Benbouziane ()

MPRA Paper from University Library of Munich, Germany

Abstract: Most of the empirical evidence has shown that the majority of oil dependent countries have the low level of financial development; thus, they are much more volatile and exposed to the oil shocks and the so named “oil curse”. This paper aims to investigate the impact of the Algerian financial system—as one of major oil economies—on the economic growth and escaping the oil curse. Over the past two decades, Algeria has courageously attempted to modernize its financial system despite social strife and challenges posed by the large hydrocarbon sector and an inefficient public sector. In fact, various reforms have been undertaken since the early 1990s to the transition from planned to an open market economy. So, the first section provides the research background based on a theoretical model and a set of empirical studies about financial development and the oil curse. An analytical framework of the Algerian financial system evolution is provided in the second section, focusing on the two phases: 1990-1999 and 2000-2011. Finally, using an econometric growth regression model to test the impact of financial development in Algeria over the period 1980-2014, the preliminary results show that the financial development enhanced economic growth but it has not contributed in reducing the negative effect of oil rents.

Keywords: Oil Curse; Financial Development; Algeria (search for similar items in EconPapers)
JEL-codes: G17 G38 O13 O16 (search for similar items in EconPapers)
Date: 2016-01, Revised 2016-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Topics in Middle Eastern and African Economies Issue No. 1, May 2016.Vol. 1(2016): pp. 112-125

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