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Financial liberalization, saving, investment and growth in MENA countries
Assessing the impact of financial development on private saving in MENA countries
| Author(s): | ACHY, L. |
| Organization: | Institut National de Statistique et d'Economie Appliquée (INSEA), Morocco |
| Year: | 2003 |
| Region(s) of Coverage: | MENA |
| Themes: |
International Affairs, Domestic Resource Mobilization, Macroeconomics and Economic Growth, Development Finance & Aid Effectiveness, Private Sector Development, Law and Rights, Urban Development and the Global South, Globalization and Trade
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| Last Updated: | Thursday, 29 July 2010 |
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Overview
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Read This Document
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Meet The Authors
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Papers by Same Organization
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Over the last two decades MENA countries as much of the developing countries have experienced a wave of liberalization of financial sector. The purpose of this paper is three fold: to review the literature on the rationale for financial repression, examining why governments adopt financial repression policies; to examine the theoretical and empirical literature on the links between financial liberalization, savings and investment; to assess the effect of financial reforms on economic performance in the specific case of MENA countries. The paper attempts to capture the effects of both banking sector and stock market developments, focussing on Egypt, Jordan, Morocco, Tunisia and Turkey between 1970-1998. The paper finds that:
- interest rates subsidies to priority sectors have been reduced or eliminated
- the monetary authorities started to manage liquidity through a more active use of reserve requirements and a more market-based allocation of refinancing
- new banking law increased autonomy of the central bank and introduced prudential regulation in line with international standards
- there has been expectations that higher financial development would enhance economic growth through better mobilization of saving and more efficient allocation of capital
- the coefficients on financial development indicators as well as on financial liberalization index indicate a negative impact of financial depth on private investment in the five MENA countries investigated
- fundamental variables such as private investment and human capital and policy related variables such trade openness, inflation rate and the burden of external debt are controlled for, financial depth indicators fail to explain growth experience in the five MENA countries under investigation
The author concludes that:
- the results on the effects of financial development on private saving are overall expected and seem to be consistent with the previous studies
- the results on the relationship between financial development and private investment on the one hand and financial development and economic growth on the other are disappointing, perhaps explained by the link between financial development and the development of mortgage and consumer credit markets
The author recommends detailed analysis at the country level in order to investigate these issues in more depth. The author argues that such analysis can take into account the effect of institutional differences and other country-specific developments. It can also capture the effect of private credit distribution between households and firms, among sectors, and between small and large firms. GDNet originated |
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Morocco
Professor, Institut National de Statistique et d'Economie Appliquée (INSEA), Morocco
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Research interests: Trade policy, Regional Integration, Trade in Services, Growth and Development, Labor Market, Gender Issues, Poverty and Economic Policy
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Themes: Domestic Resource Mobilization, Gender, Globalization and Trade, Governance, Labor & Social Protections, Macroeconomics and Economic Growth, Migration, Poverty & Inequality, Private Sector Development |
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