Financial Development, Trade Openness and Economic Growth in North African Countries

Zghidi, Nahed
Abida, Zouheir
JEL codes: 
C23 - Models with Panel Data; Longitudinal Data; Spatial Time Series, F13 - Trade Policy; International Trade Organizations, F43 - Economic Growth of Open Economies, O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance.
This contribution investigates the causal interactions between financial development, trade openness and economic growth in a panel of 3 countries of North Africa (Tunisia, Morocco, and Egypt) over the period 1980-2012. Using system Generalized Method of Moment (GMM) panel data analysis, we find strong evidence of a positive link between trade openness and economic growth. We also find evidence that trade openness appear to be working as a complement to financial development and, moreover, that the effect of trade openness is more pronounced in the presence of the financial development variable. The policy implications of this study appeared clear. Improvement efforts need to be driven by local-level reforms to ensure the development of domestic financial system in order to take advantage of trade liberalization.
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