Middle East And North Africa Economies Research Articles

Nonlinear network connectedness: Assessing financial risk transmission in MENA and influence of external financial conditions

This study investigates the influence of global financial market conditions on financial risk connectedness and transmission among the Middle East and North Africa (MENA) economies. Utilizing weekly realized stock market volatilities as a measure of risk and employing a smooth transition threshold vector autoregressive (STVAR) model to analyze risk transmission under varying levels of financial stress, the authors also examine the impact of external macroeconomic conditions on the risk connectedness of MENA economies. The results indicate that the overall connectedness, based on a standard VAR model, is moderate at 48.34%. However, in the low financial stress regime, overall connectedness increases to 52.79%, and in the high financial stress regime, it rises to 72.94%, indicating stronger risk interdependency among MENA countries during times of high stress. In the high financial stress regime, Kuwait, Oman, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates are identified as net risk transmitters among MENA countries. The study also reveals that risk transmission across MENA is more pronounced in the regime-dependent model compared to the overall mean-based VAR model.

The Impact of Structural Transformation on Global Value Chains in the MENA Countries

Abstract Several studies on economic transition propose that structural change in developing countries, that involves reallocating from less productive to more productive sectors, might enhance participation in global value chains (GVCs). However, there is a lack of empirical work on this claim. This study explores the factors affecting global value chain (GVC) participation in the Middle East and North Africa (MENA) region while considering structural transformation from 2000 to 2018. By applying the system GMM empirical research method, we found that structural change significantly contributes to facilitating the position of MENA economies under consideration. Specifically, the service and industry sectors play pivotal roles in these countries. This study also postulates that if we want to strengthen the participation of companies in GVCs, access to the internet, and a high level of education tertiary are necessary Also, environment and policies conducive to investment and direct investment abroad are important. The study posits positive commercial and financial links, and population size as important factors in promoting this position.

Oil and natural gas rents and CO2 emissions nexus in MENA: spatial analysis.

Oil rents (OR) and natural gas rents (NGR) have significant contributions to the income of the Middle East and North Africa (MENA) economies and may increase emissions. Moreover, spatial autocorrelation is expected in carbon dioxide (CO2) emissions due to the geographically closed economies in the MENA region. Thus, we examine the impact of OR and NGR on CO2 emissions caring spatial dimensions and analyze the environmental Kuznets curve (EKC). We apply the spatial Durbin model technique on the effects of OR, NGR, and economic growth on CO2 emissions in 17 MENA nations from 2000-2019, i.e., Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates (UAE), and Yemen. Moreover, diagnostic tests are applied to reach the most appropriate spatial specification and to have the most robust results. The results disclose that CO2 emissions have spillovers and emissions of any country can damage the environment of neighboring countries. The EKC is corroborated with a turning point of 38,698 constant 2015 US dollars. Israel and Qatar are in 2nd phase of the EKC, and 15 MENA economies are in 1st stage. Thus, the economic expansion of most economies has ecological concerns. The effect of natural gas rents is found statistically insignificant. Oil rents have minute negative effects on emissions of local economies with an elasticity coefficient of -0.2117. Nevertheless, these have a positive indirect effect with an elasticity coefficient of 0.5328. Thus, the net effect of oil rents is positive. One percent increase in oil rents could accelerate 0.3211% of emissions. Thus, we suggest the MENA countries reduce reliance on oil rents in their income to avoid the negative environmental effects of the oil sector.

Innovations and the CO2 Emissions Nexus in the MENA Region: A Spatial Analysis

Patents support technological innovations in any economy and would also support a clean environment. We investigate the effects of economic growth, patents, industrialization, and urbanization on CO2 emissions in 17 Middle East and North Africa (MENA) economies by applying spatial econometrics. We substantiate the Environment Kuznets Curve (EKC) in the domestic economies and the whole MENA region as per direct and total estimates. Moreover, urbanization increases CO2 emissions in local economies and reduces neighboring nations’ emissions. The total effect of urbanization is found to be insignificant. Industrial value added increases CO2 emissions in domestic and neighboring countries, as well as in the whole MENA region. Patents increase CO2 emissions in domestic economies. However, patents reduce CO2 emissions in neighboring countries and the MENA region. Thus, patents have a pleasant effect on the environment in the whole MENA region. It is suggested that the MENA economies focus more on patents to reduce CO2 emissions. Moreover, urbanization and the industrial sector should be checked to protect the environment.

Do natural resources and economic components exhibit differential quantile environmental effects?

AbstractIn view of the resource curse assumption, the environmental aspects of resource utilization are arguably posing more dangers to human existence. In the Middle East and North Africa (MENA) region, the region that holds more than 60% and 50% of the world's oil and gas reserves respectively, the need to examine the contribution of natural resources to environmental quality among other factors cannot be overemphasized. By leveraging on the novelty of observing the differential impact of natural resources and other economic components such as income and primary energy utilizations across the quantiles of carbon emission, this study implements the quantile regression approach alongside other relevant techniques to analyze data between 1990 and 2018 for selected countries in the MENA region including Saudi Arabia, Iran, Kuwait, Qatar, Algeria, Morocco, Oman, Egypt, and the United Arab Emirates (UAE). The result posits that natural resource utilization generally hampers the environment across the quantiles. However, this negative effect decreases until the 50th quantile before starting to rise again toward the upper quantiles. Additionally, primary energy utilization and globalization respectively worsen and improve environmental quantile, especially toward the upper quantiles while income affirms the inverted U‐shaped hypothesis across the entire quantiles. Moreover, there is a statistically significant one‐way directional causality from natural resources, economic expansion, primary energy use, and globalization to carbon emission levels. Hence, the study offers environmentally friendly resource utilization policies to the MENA economies and other resource‐rich states by extension.

The effect of gender equality on the carbon intensity of well-being: panel data analysis for the MENA economies 1995-2018

PurposeThis paper aims to explore the ecological efficiency through assessing the relation of the “carbon intensity of well-being” (CIWB) to gender equality, gross domestic product (GDP)/capita, the urban intensity of the population, the age structure of the population, foreign direct investment as a percentage of GDP and manufacturing as a percentage of GDP.Design/methodology/approachCIWB equation is estimated for a panel of 18 MENA economies and Turkey over the period 1995–2018 using the two-way fixed effects Prais–Winsten regression with panel-corrected standard errors.FindingsThe elasticity coefficients obtained from the estimated models indicated mixed effects on CIWB. While the increase of female educational attainment, accompanied with an increase in the female labor force participation rate, reduce CIWB, the younger female population and the younger population, in general, increase CIWB. Furthermore, while increasing FDI inflows reduces CIWB, increasing the manufacturing share of GDP increases CIWB.Originality/valueThe pursuit of Sustainable Development Goals worldwide has moved the relevant literature on climate change mitigation and adaptation measures to a new level, where using the CIWB method is increasingly used to reflect carbon dioxide emissions per capita unit of expected lifespan. The present paper’s contribution to the literature is two-fold: one is computing and estimating the CIWB to examine ecological efficiency for the middle east and north africa (MENA) economies and Turkey over the period of study; and two is integrating and validating the beneficial impacts of integrating the gender equality dimension in the CIWB–climate change literature.

FDI inflows and bank deposits: evidence from 18 MENA economies

PurposeThis paper aims to examine and compare the impact of foreign direct investment (FDI) inflows on bank deposits in aggregate as well as at the level of conventional and Islamic banks in Middle East and North Africa (MENA) countries. The study also tests hypotheses of direct and indirect impacts of FDI flow and FDI stock on bank deposits.Design/methodology/approachStatic and dynamic panel generalized methods of moments (GMM) estimation techniques are applied to analyze a large data set of 491 commercial banks (422 conventional banks and 69 Islamic banks) across 18 MENA countries between 1993 and 2017 (12,275 year observations).FindingsEmpirical results indicate that inflowing FDI flow and FDI stock have a significant negative direct impact on deposits of MENA banks. The results lend support for the direct channel hypothesis for the effect of FDI on bank deposits and find no evidence in support of the indirect channel hypothesis. FDI inflows affect bank deposits directly via increased FDI-related excessive competition in the banking market. Deposits from conventional banks appear to be more affected than those from Islamic banks. The variation may due to the fact that Islamic banks have fewer multinational corporations (MNC) customers than conventional banks and therefore are less sensitive to fluctuations in FDI.Practical implicationsFrom this analysis, this study concludes that foreign investments have a higher productivity than local investments in MENA region. Attracting more FDI is aimed at increasing overall national productivity through competition. However, governments would be wise to enact such a policy to maximize benefits and minimize potential harm to local industry. Furthermore, FDI policy should encourage small to medium-size banks and firms (SMEs)’ participation and linkage with multinational banks and MNCs, while upgrading research and development institutions and innovation activities to help SMEs to benefit from potential spillovers from foreign presence in the industry. In addition, the linkage and connection between SMEs and foreign firms should be strengthened and promoted by government policy.Originality/valueThis study is the first of its kind to examine the effect of FDI inflows on bank deposits. It also provides an in-depth quantitative analysis of the impact of FDI flow and FDI stock, separately, on bank deposits for both conventional and Islamic banks. It distinguishes between direct and indirect channels through which FDI inflows may affect bank deposits. The study analyzes 25 years of panel data for 491 banks (12,275 year observations) and uses both static and dynamic panel GMM estimation techniques to analyze the data.

Analysis of CO2 emissions and energy consumption by sources in MENA countries: evidence from quantile regressions.

The development of economies and energy usage can significantly impact the carbon dioxide (CO2) emissions in the Middle East and North Africa (MENA) countries. Therefore, this study aims to analyze the factors that determine CO2 emissions in MENA under the environmental Kuznets curve (EKC) framework by applying novel quantile techniques on data for CO2 emissions, real income, renewable and non-renewable energy consumption, and urbanization over the period from 1990 to 2015. The results from the estimations suggest that renewable energy consumption significantly reduces the level of emissions; furthermore, its impact increases with higher quantiles. In addition, non-renewable energy consumption increases CO2 emissions, while its magnitude decreases with higher quantiles. The empirical results also confirm the validity of EKC hypothesis for the panel of MENA economies. Policymakers in the region should implement policies and regulations to promote the adoption and use of renewable energy to mitigate carbon emissions.

Drivers and challenges for transnational land–water–food investments by the Middle East and North Africa region

AbstractOver the last decade, transnational land–water investments in farmlands abroad by the Middle East and North Africa (MENA) economies have been adopted as an alternative strategy to address water–food scarcity and security narratives. Large‐scale land acquisitions in farmlands abroad are often attributed to the food and fuel crisis of 2007/8 and 2010/11. Land–water investments entail several drivers and challenges in light of demographic growth trends, physical water stress, commodity market fluctuations, food sovereignty concerns, and climate change uncertainties across diverse countries of the MENA region. Despite the ongoing reliance on virtual water trade to secure their food needs, transnational investments were adopted by MENA economies as an alternative strategy for water–food security. From a political economy standpoint, such investments are founded on state‐capital alliances to achieve both; profit as well as larger strategic objectives. Critical literature attempted to unpack transnational land–water investments through different analytical lenses including accumulation by dispossession, resources grabs, nexus, and water security mercantilism. Yet, the materialization of the investments on the ground go beyond these debates, and is often associated with challenges related to infrastructure, energy, investment climate, labor, as well as other environmental, social, and sovereign risks. Most importantly, land–water–food investments may also entail hydropolitical risks on local, national, and transboundary levels.This article is categorized under:Human Water > Water GovernanceEngineering Water > Planning Water

Does regional energy consumption disparities assist to control environmental degradation in OBOR: an entropy approach.

China launched the One Belt & One Road (OBOR) initiative to minimize the energy resource shortage. The China's nearby countries are rich in energy resources especially Middle East and North Africa (MENA) and Asian countries which make them ideal locations to cooperate with China in terms of energy resources, as 42.8% of world energy consumption belongs to OBOR countries. The present study elaborates the spatial distribution pattern of energy consumption disparities and its impact on environment. To do this, an entropy approach is utilized to compute the energy consumption inequalities in OBOR and its regions. The spatial and Pareto analysis show that MENA, East, and Southeast Asian economies have the highest degree of energy consumption inequalities, while European and Central Asian economies show the lowest energy consumption inequalities in OBOR region. The long-run estimates indicate that energy consumption inequalities enhance the CO2 emission in OBOR and its region except South and Southeast Asia. Financial development also has a significantly positive impact on CO2 emission in all models for OBOR and its regions except East Asia. Based on findings, the spatial distribution analysis is applicable to maintain balance in regional energy consumption inequality within OBOR and its regions.

Determinants of Labor Productivity in MENA Countries

ABSTRACTThis article scrutinizes the role of various determinants (compensation, human capital, oil rent, trade, financial development, innovation, and industrialization) in labor productivity in the context of Middle East and North Africa (MENA) countries. Dynamic-OLS and fully modified-OLS were applied to analyze panel time series data over the period 1980 to 2014. It was found that size of employment and compensation are negatively associated with labor productivity, while human capital and capital stock are positively associated with it; and that oil rent, financial development, trade openness, and industrial value addition play significant roles in promoting labor productivity. Finally, innovation was found to be an important factor in accelerating labor productivity. These findings are important for labor policy making in MENA economies.

Teoretski prikaz mikro-faktora binarnog investicionog odlučivanja u zemljama MENA regiona

This explorative study advocates firm characteristics as potential drivers of Foreign Direct Investment (FDI) within the Middle East and North Africa (MENA) region. Research propositions stipulate the role of firm-specific variables in explaining the regional expansion of MENA companies through FDI. MENA companies in different sectors have increasingly invested in other countries in the region over the last years and this does not seem to be restricted to isolated cases. These regional investors are not dissuaded by the challenging economic and institutional conditions in MENA economies. Therefore, there is a need to understand what could possibly lead companies in MENA countries to invest in other markets in their region despite their unattractiveness for the outside investors. A set of eight propositions has been established to account for the potential role of firm-level variables in explaining this decision. Variables pertain to firm size, ownership advantages, productivity, networking capabilities, international experience, affiliation with homeland authorities, and leverage.

Rethinking Human Development in the Middle East and North Africa: The Missing Dimensions

In this paper I review the state of human development in the Middle East and North Africa (MENA) and its evolution in the past four decades. I highlight the following salient characteristics of MENA economies that shape human development in the region: high income from hydrocarbon exports, which drive a wedge between individual productivity and consumption; demographic factors, such as delayed fertility transition and rapid growth of the youth population; imbalances in the labor markets, evidenced by high rates of youth unemployment and low participation of women in the labor market; high investment in schooling but with low productivity of education; and imbalance in marriage markets resulting in delayed marriage. I argue that these regional characteristics affect welfare and human development in MENA countries deeply but in ways that are not easily captured by standard human development measurement.

Short- and Medium-Term Determinants of Current Account Balances in Middle East and North Africa Countries

The main aim of the paper is to examine the short- and medium-term empirical link between current account balances and a broad set of (economic) variables proposed by theoretical and empirical literature. The paper focuses on the Middle East and North Africa (MENA), an economically diverse region, which has so far mainly been neglected in such empirical analyzes. For this purpose, a (dynamic) panel-regression technique is used to characterize the properties of current account variations across selected MENA economies in the 1971-2005 period. The results, which are generally consistent with theoretical and previous empirical analyses, indicate that higher (domestic and foreign) investment, government expenditure and foreign interest rates have a negative effect on the current account balance. On the other hand, a more open economy, higher oil prices and domestic economic growth generate an improvement in the external balance, whereas the latter implies that the domestic growth rate is associated with a larger increase in domestic savings than investment. Finally, the results show a relatively high persistency of current accounts and reject the validity of the stages of development hypothesis as poorer countries in the region reveal a higher current account surplus (or lower deficit).

The effects of corruption on growth performance of the mena countries

This article aims at testing the effects of institutional characteristics on growth in countries of the Middle East and North Africa (MENA) region. For this purpose we consider conditional convergence in terms of initial conditions, macroeconomic performance, trade openness, government size, natural resource abundance and institutional and political structures for a sample of 90 countries over the period 1960–2000. We use regional indicators and MENA-specific variables in order to test for the effects of each variable on the growth performance of the MENA economies. We highlight the direct and indirect impacts of both corruption and bureaucratic quality on the MENA growth compared to the other regions of the world.

Financial Markets of the Middle East and North Africa: The Past and Present

The recent political developments in the Middle East have prompted increased scrutiny of the economies of the nations lying in this region. Over the past few months, the financial markets of Middle East and North Africa (MENA) have been affected by the speculations that existed before the war in Iraq as well as its subsequent repercussions. Factors such as lagging domestic, political reforms, government interference, and inflexible monetary and fiscal policies remain obstacles to privatization, globalization, and foreign investment in MENA economies. As the economies enter the post-war recovery phase, reform of financial markets seems necessary to accelerate economic growth.

The Euro and the Production Structure and Export Performance of Middle East and North African Countries

This paper explores the link between exchange rate volatility of European currencies and economic performance of several countries in the Middle East and North Africa (MENA). The elimination of intra euro-zone exchange rate volatility resulting from the introduction of the euro is estimated to affect the production structure of MENA economies and shift their exports from manufacturing to agriculture and services. At the country and industry levels, the impact of the euro is more striking in countries with higher shares of manufacturing and higher shares of exports to the euro zone.