No abstract

This paper empirically investigates the relationship between financial development and economic growth in the North Africa region, using a panel regression and different indicators of financial development. We find that the relation depends on the type of the indicator of financial development. In fact, while both financial institutions and markets in Morocco and Tunisia have a positive effect on the economic growth, only the financial markets in Egypt will improve economic growth by increasing the supply of financial services. For Algeria, the banking system has a positive effect on economic growth.

This study employs data envelope analysis to produce the efficiency measures for both Islamic and conventional banks and conducts the means tests to investigate the efficiency comparison between the two bank types in the Gulf Cooperation Council (GCC) countries. 28 conventional banks and 20 Islamic banks are selected across the six countries in the GCC according to data availability for the period 2006 -2012. Two output variables, total loans and investments, and four input variables, total deposit, equity, fixed assets and general expenses are used in the DEA. Under the assumption of constant return to scale, no evidence is found for efficiency difference between the two bank types; and under the assumption of variable return to scale, the conventional banks are found to be more efficient than their Islamic counterparts in two points of time, 2009 and 2010, following the 2008 financial crisis. For within country efficiency comparisons, the two bank types are the same in Saudi Arabia, Kuwait and Qatar. The conventional banks are found to be more efficient than their Islamic counterparts in Bahrain and Emirates. The paper finds no evidence for the presence of technological improvements in the banking operations as indicated by the Malmquist productivity analysis.

In this paper, we investigate the volatility spillovers between equity market indexes for Islamic and non-Islamic emerging countries. To do so, we implement a combination of a vector autoregressive (VAR) and a multivariate GARCH models under BEKK specification (VAR-BEKK-MGARCH) models with constant conditional correlation (CCC) and dynamic conditional correlations (DCC) for daily equity returns of six markets, namely Turkey, Indonesia, Egypt, Mexico, China and Brazil. Our findings disclose strong volatility spillovers among the Islamic and the non-Islamic country' market returns. The volatility spillovers are time varying and are affected by the occurrence of recent financial crises. Furthermore, we extent the volatility spillovers analysis by providing some financial implications in terms of optimal portfolio' allocations and hedging effectiveness. Specifically, we estimate the optimal weights for a minimum risk multi-country portfolios, we compute the hedge ratio and we assess the hedging strategies' effectiveness. Our findings provide prominent implications for policy makers and portfolio managers in terms of the stability of the financial systems, asset allocation decisions and designing portfolio hedging strategies.

The paper emplyos the Pooled Mean Group (PMG) estimation to investigate empirically the relationship among carbon dioxide (CO2) emissions and potential determinants for a panel of 18 MENA countries during the period 1980-2018. The good properties in terms of consistency and efficiency of the coefficient estimates make the PMG approach very useful for examining the determinants of pollution emissions in the framework of dynamic heterogeneous panel data models over both the long- and short-run. Unlike the extant literature on MENA economies, many determinants are included in the analysis to avoid the bias problem of omitted variables. Three energy sources and two classes of sub-panels according to regional proximities and oil wealth are considered in order to provide a sensitivity check on the findings and to make the analysis more homogeneous. The results reveal long-run relationships between pollution emissions and the selected variables. All determinants are found to be statistically significant for all panels and energy sources over the short-run. However, some variables are not significant determinants over the long-run. The Environment Kuznet's Curve (EKC) hypothesis is supported only for the panel of non-oil countries, which has meaningful implications and reveals the importance of splitting the global panel in order to appropriately examine the EKC hypothesis and conduct policy debates according to the findings of each panel. The obtained results provide important policy implications.

We examine and test the validity of the expectation hypothesis of the term structure (EHTS) of interest rates in Saudi Arabia using the traditional single equation approach, Campbell and Shiller methodology, Error Correction Model, and monthly data over the period June 1983 to December 2014. The results of the single equation approach indicate that the test of validity of the expectation hypothesis cannot be rejected for all maturities. We also find that the validity of the EHTS of interest rates is supported through the stationarity of the term spreads between short- and long-term interest rates. Moreover, the cointegration test reveals the existence of a cointegration relationship between short- and long-term interest with $\left(1-1\right)$ cointegrating vector, suggesting the validity EHTS of interest rates. Policy implications based on the empirical results suggest that the transparency of monetary policy in Saudi Arabia and the effective role of the Saudi Arabian Monetary Authority (SAMA) in conducting monetary policy increase the predictive power of market participants of future movements of short-term interest rates.

This paper empirically investigates the interdependence between GCC stock market and oil price by considering structural breaks in conditional volatility. The univariate and multivariate GARCH models are extended by including structural breaks which are determined endogenously by using ICSS algorithm proposed by Inclan and Tiao. Empirical results indicate that the inclusion of structural breaks in the model substantially reduces the volatility persistence and the estimated half-life of shocks. Hence, the conditional volatility of oil price and stock market are more affected by their own shocks and volatility when structural breaks are neglected. Likewise, our results are conclusive on conditional dependency between GCC stock market and oil price revealing that the volatility shifts reduce the shocks and volatility spillover effects. For the portfolio management, the empirical results show evidence of sensitivity of the optimal weight and hedge ratios to structural breaks in conditional volatility.