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Institutions and the finance–growth nexus: Empirical evidence from MENA countries

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Khattar Torbey Khattar Torbey
2 months ago
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This provides strong evidence that institutional quality mitigates the negative effect of financial development on economic growth.
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An empirical model with linear interaction between financial development and institutional quality is estimated. As econometric methodology, we use the GMM estimators developed for dynamic panel data for a sample of 18 MENA countries over the period from 1984 to 2007. Our main findings show that, while most indicators of financial development have a significantly negative effect on economic growth, the sign of the coefficients of interaction variables are significantly positive. This provides strong evidence that institutional quality mitigates the negative effect of financial development on economic growth. These results are in line with
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