Publication Details

Muhammad, N. & Islam, A. Reza M. 2015, 'A re-examination of the finance-growth nexus for the MENA region using static and dynamic panel data', International Research Journal of Finance and Economics, no. 132, pp. 112-135.


This paper contributes to the existing empirics of finance-growth nexus of MENA countries based on a longer time period (1975-2012). It incorporates additional control variables such as FDI and an interaction term of FDI and financial development variables. It employed four estimation techniques, Pooled OLS, Fixed effect estimation, Random effect estimation, and the system GMM estimation, and used static and dynamic panel data. It obtains a robust finding of consistently no impact of financial sector development (FSD) on economic growth of MENA countries to all estimation techniques. The paper exemplifies that FSD especially, the banking sector has not been strong and efficient enough to effectively influence the economic growth. It strongly recommends the strengthening of the ongoing efforts of financial sector reforms, its supervision, monitoring and evaluation. The FDI effect on economic growth is positive and significant in all four estimation methods. Fixed capital formation contributes positively while trade openness and government expenditures have not played any significant role in the growth of MENA countries during the study period.