What Drives Stock Market Development in the Middle East and Central Asia: Institutions, Remittances, Or Natural Resources?, Issues 2007-2157
International Monetary Fund, Jul 1, 2007 - Business & Economics - 21 pages
In this paper, we assess the macroeconomic determinants of stock market capitalization in a panel of 17 countries in the Middle East and Central Asia, including both hydrocarbon-rich countries and economies without sizeable natural resource wealth. In addition to traditional variables, we include an institutional variable and remittances among the regressors. We find that (i) both institutions and remittances have a positive and significant impact on market capitalization; and (ii) both regressors matter, especially in countries without significant hydrocarbon sectors; whereas (iii) in resource-rich countries, stock market capitalization is mainly driven by the oil price.
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Bahrain Central Asia Economies column dependent variable Determinants of Stock development and economic domestic credit East and Central economic growth effect Egypt explaining stock market explanatory variables federal funds rate financial deepening financial markets Garcia and Liu Ghazouani Heritage Foundation hydrocarbon economies hydrocarbon resources impact of remittances impact on stock Inflation change institutional quality institutions and remittances investor Jordan Kazakhstan Kyrgyz Republic lagged income lagged investment literature macroeconomic market liquidity measure Middle East monetary Moreover Naceur natural resource endowment non-hydrocarbon countries non-oil countries non-oil economies oil and non-oil oil countries Omran Pakistan panel regressions positive impact Qatar quality of institutions recipient country region remittance flows remittances on economic resource-rich economies Saudi Arabia score share of GDP significance of institutions sizeable splitting the country Splitting the sample stock market boom stock market capitalization stock market development stocks traded subsample Tunisia U.S. dollar United Arab Emirates whole sample