This paper identifies the association between off balance sheet businesses and a number of determinants identified for the banking sectors of the Gulf Cooperation Council countries. The Fixed Effects Least Squares Dummy Variable Model is used to identify the determinants for a large sample of 64 banks over a recent fifteen-year period. The results reveal that bank-specific variables have important roles in influencing off balance businesses. As for the regulatory variable, capital items are less important, which is contrary to the long-held market discipline hypothesis, under which secure banks are predisposed to engage in more off balance businesses. The macroeconomic variable reveals that higher real GDP growth does not necessarily cause an increase in the off balance activities. However, its positive impact indicates that the off balance business actions follow business cycles, and the overall growth of economy. Prudential regulators, as a policy matter, need to consider region-wide implications of these findings. This is important given the fact that regulating how off balance business is conducted in the region would influence costs and the scope of banks, hence also the monetary policy.
This paper examines causalities among foreign direct investment (FDI), economic growth (GTH), and financial development proxied by both equity market size (EQM) and bank credit to private sectors (BANK). We use a structural cointegration model with a vector error correction (VEC) mechanism to test for the short-term dynamics of the model. The results show that there is a reinforcing causal relationship between FDI and EQM, and between EQM and GTH in the short term, and that these variables cointegrate in the long term. As far as practical implications are concerned, the results reinforce that developed financial markets are an essential precondition for the positive impact of FDI on economic growth, reflecting host countries' ability to exploit FDI more efficiently. Moreover, the paper provides further substance for the notion that a country with a well-developed financial market gains significantly from FDI inflow. JEL Classifications: C32; F43; O16, O53
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.