Financial Structure and Economic Growth: An Empirical Study in the MENA Region

Document Type : Research Paper

Author

Department of Economics, Faculty of Business Administration, Beirut Arab University, Beirut, Lebanon

Abstract

The relationship between financial structure and economic growth has been explored through three indicators which are related to financial structure amongst eleven different countries based within the Middle East and North Africa region. The first two indicators, which are a measure of financial structure, will be adopted in this paper based on Levine’s (2002) study in this field and consist of structure-activity (S-ACT) and structure-size (S-SIZE). The third indicator was calculated using the principal component analysis. This paper not only employs the unbalanced data of eleven countries within the MENA region for the period between 1995-2018, but also aims to achieve an empirical evaluation. The outcomes from the fixed effect regression support the fact that the FS matters to economic growth and exclusively the bank system only when the financial structure is measured by S-ACT, whereas when the other indicators were applied it appeared that there was no significant correlation.

Keywords