Are Output Fluctuations Transitory in the MENA Region

This study analyzes the nonstationarity of per capita real GDP for 11 Middle East and North Asia (MENA) Countries over the period 1970 to 2012 using two recently developed methods. SURADF and CADF panel unit root tests allowing for cross sectional dependence are used to determine whether output fluctuations are permanent or transitory. Contrary to the traditional view of business cycle, we find econometric evidences supporting the idea that the output fluctuations in MENA region are mostly permanent. These results also emphasize that the effectiveness of stabilization policies aimed real output by government should be reviewed to achieve long-lasting results.