آنالیز علیت گرنجر پنل بوت استرپ برای توسعه مالی و رشد اقتصادی در کشورهای MENA

ABSTRACT Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis

The relationship between financial development and economic growth has been one of the hotly debated issues of whether the financial sector actually contributes to the real sector in the process of economic development. There is a great deal of empirical literature that has scrutinized the experiences of the developed and developing economies. This special interest comes from the intermediary role of financial markets between savers and investors in the process of economic development. Specifically, financial systems facilitate the trading, hedging, diversifying, and pooling of risk, allocate resources, monitor managers and exert corporate control, mobilize savings, and ease the exchange of goods and services (Levine, 1997). It is, therefore, widely accepted that well-functioning financial markets can positively contribute to economic growth in both developed and developing economies.

The MENA countries, over the last two decades, have experienced a wave of liberalization in the financial sector (Ben Naceur et al., 2008) with an expectation that lifting government restrictions on the banking system in terms of interest rate ceiling, high reserve requirement, and directed credit programs which enhance financial development and, in turn, expected to promote economic growth (McKinnon, 1973; Shaw, 1973). A careful investigation of the results from these experiences provides additional evidence of whether the financial sector actually causes to economic growth. The aim of this paper is therefore to empirically investigate the direction of causality between financial development and economic growth in the MENA countries. To this end, the panel Granger causality testing procedure developed by Kónya (2006) is conducted for fifteen MENA countries over the period 1980–2007.

This paper contributes to the empirical literature on financial development and economic growth by three aspects. Firstly, the panel causality test carried out in this research is novel to the literature on financial development and economic growth. In particular, the panel causality approach controls for cross-sectional dependence across the members. Since the assumption of cross-sectional independence is difficult to satisfy in a panel data, neglecting this information causes bias and inconsistency in empirical results (Bai and Kao, 2006). To the best of our knowledge, there is no attempt to incorporate the hypothesis of cross-sectional dependence in the literature on financial development and economic growth in the MENA countries. Secondly, due to the multidimensional nature of financial development, six different indicators of financial development are utilized to capture these various aspects of financial sector in the process of economic development. Thirdly, the data set utilized in the analysis contains fifteen MENA countries for a quite long period, 1980–2007, which are based upon the availability of the data.

Structure of this paper is as follows: the theoretical framework which provides potential channels for financial sector to economic growth will be explained in Section 2. The existing empirical literature on financial development–economic growth nexus will be reviewed in Section 3. The measures of financial development will be introduced in Section 4, followed by the model specification and data in Section 5. The empirical methodology and findings will be presented in Section 6. The paper will end up with the concluding remarks.