The purpose of this article is to examine is to the link between stock markets and economic growth in advanced and emerging economies in the Middle East and North Africa (mena) region.
Indices measuring the degree of financial openness and market development are constructed and used to perform various Granger causality tests to identify predictors of current growth rates.
It is found that the link exists only in the group of high income countries but this relationship is rather weak for the low income MENA economies. Privatization alone, although necessary, is not enough to spur economic growth. The establishment of sound institutions and well‐defined regulatory policies are needed to protect investors’ rights and entice them to invest in real and financial assets in the MENA region.
The paper offers insights into financial integration, regulation and competitiveness in MENA countries.
