Conference Paper
Natural Resource Volatility and Inclusive Growth in MENA: The Moderating Effect of Financial Development and Institutions
No.
ERF30_34
Publisher
ERF
Date
March, 2024
This study investigates the nexus between natural resource volatility and inclusive growth while examining the moderating impact of financial development and institutional quality across 18 Middle East and North African (MENA) countries from 2002 to 2021. The empirical results based on the twostep system GMM estimation reveal that natural resource volatility positively affects inclusive growth after controlling for moderation effects, implying that natural resources are a blessing in MENA. The results also indicate that the proposed moderators play a pivotal role in shaping the impact of volatility on inclusive growth. Institutions and volatility exhibit a synergistic relationship in promoting inclusivity in the MENA region. Nonetheless, volatility and financial development are substitutive in promoting inclusive growth since financial development (natural resource volatility) weakens the positive impact of volatility (financial development). Overall, institutional quality and financial development have a net positive impact on inclusive growth. However, the positive effect of financial development is entirely negated at a volatility threshold of 34%, whereas institutional quality has a net positive effect beyond a volatility threshold of 17%. Additionally, the net positive impact of volatility on inclusive growth is nullified at a financial development threshold of 80%. Policymakers in MENA are recommended to be prudent with these thresholds while pursuing shared prosperity from their abundant natural resources.
Authors
Eslam A. Hassanein
Assistant Lecturer, Faculty of Politics and Economics,...
Authors
Nourhan A. Hassan
Assistant Lecturer, Faculty of Economics and Political...