Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis

This paper investigates the direction of causality between financial development and economic growth in the Middle East and North African (MENA) countries. The panel causality testing approach, developed by Kónya (2006) [Kónya, L. (2006), exports and growth: Granger causality analysis on OECD countries with a panel data approach, Economic Modelling, 23, 978–992], based on the Seemingly Unrelated Regressions and Wald tests with the country specific bootstrap critical values, is applied to the panel of fifteen MENA countries for the period 1980–2007. In order to capture the different aspects of financial development, six different indicators are used. Empirical results show that there is no clear consensus on the direction of causality between financial development and economic growth for all measurements of financial development and it is also observed that the findings are country specific.