Buradasınız

Anasayfa » Content

The Effects of External Financial Shocks on Financial Integration and Economic Growth: A VAR Approach for Maghreb Countries

Journal Name:

  • International Journal of Innovation and Applied Studies

Publication Year:

  • 2013

Key Words:

Author Name
Abstract (2. Language): 
The main objective of this paper is to quantify the importance of external shocks in domestic and external variables fluctuations for a sample of three North African countries (Algeria, Morocco, and Tunisia) using a VAR model estimation with quarterly data during the period 1990-2010. Since the early 1990s, Maghreb countries have implemented these last year, structural liberalization policies and modernized banking and financial regulations in order to strengthen their financial systems, establish an economic union between them and improve their economic growth rates. Accompanying to these developments, the study of this relationship has been largely analyzed in the literature. In fact, several theoretical and empirical studies have been elaborated to understand the process of international banking and financial shocks and their impact on economic development of countries as well as on the ability to create economic integration between them. Results find that external shocks negatively affect economic growth of Maghreb countries and impede the implementation of financial integration project. In addition, we document the dynamic response of each studied variable to external financial stress in these economies. Our results on variance decompositions and impulse responses functions show that Maghreb countries appear especially sensitive to the trade and the financial channel.
Bookmark/Search this post with
FULL TEXT (PDF): 
PDF icon ijias-13-102-01.pdf
  • 2
403-424
  • English

REFERENCES

References: 

[1] R. A. Mundell, "A Theory of Optimum Currency Areas", The American Economic Review, Vol. 51, No. 4, pp. 657-665,
September 1961.
[2] J. D. Hamilton, "Oil and the Macroeconomy Since World War II", The Journal of Political Economy, Vol. 91, No. 2, pp.
228-248, April 1983.
[3] B. S. Bernanke, M. Gertler, and M. Watson, "Systematic Monetary Policy and the Effects of Oil Price Shocks", Brookings
Papers on Economic Activity, Vol. 1997, No. 1, pp. 91-157, 1997.
[4] A. Demirgüç-Kunt, and E. Detragiache, "The Determinants of Banking Crises in Developing and Developed Countries",
IMF Staff Papers, Vol. 45, No. 1, pp. 81-109, March 1998.
[5] G. Kaminsky, and C. Reinhart, "The twin crises: the causes of banking and balance of payments problems", American
Economic Review, Vol. 89, No. 3, pp. 473-500, June 1999.
[6] R. Glick, and M. Hutchinson, "Banking and Currency Crises: How Common Are Twins?", Pacific Basin Working Paper
Series, No. PB99-07, Federal Reserve Bank of San Francisco, December 1999.
[7] T. H. Ng, "Should the Southeast Asian Countries form a Currency Union?" The Developing Economies, XL-2, pp. 113-34,
June 2002.
[8] M. Illing, "A Review of Notable Financial-Stress Events" in Essays on Financial Stability Report, by John Chant, Alexandra
Lai, Mark Illing, and Fred Daniel, Bank of Canada Technical Report, No. 95, pp 61-88, September 2003.
[9] P. Aghion, P. Bacchetta, and A. Banerjee, "Financial development and the instability of open economies", Journal of
Monetary Economics, No. 51, pp. 1077-1106, 2004.
[10] Y. Huang, and F. Guo, "Is currency union a feasible option in East Asia? A multivariate structural VAR approach",
Research in International Business and Finance, No. 20, pp. 77-94, 2006.
[11] J. L. Saving, "Integration and Globalization: the European Bellwether", Economic Letter, Federal Reserve Bank of Dallas,
Vol. 1, No. 5, May 2006.
[12] R. Rancière, A. Tornell, and F. Westermann, "Systemic Crises and Growth", The Quarterly Journal of Economics, MIT
Press, Vol. 123(1), pp 359-406, 2008.
Soumia ZENASNI and Abderrezzak BENHABIB
ISSN : 2028-9324 Vol. 3 No. 2, June 2013 417
[13] S. Edwards, "Sequencing of reforms, financial globalization, and macroeconomic vulnerability", Journal of the Japanese
and International Economies, Elsevier, Vol. 23(2), pp 131-148, June 2009.
[14] A. J. Galindo, A. Izquierdo, and L. Rojas-Suarez, "Financial Integration and Foreign Banks in Latin America: How do they
Impact the Transmission of External Financial Shocks?", IDB working paper series, No. 116, pp 5-37, January 2009.
[15] H. Ersel, "Vulnerability to External Financial Shocks: the Case of Turkey", ERF Working Paper, No. 520, May 2010.
[16] N. Dincer, M. Kandil, and M. Trabelsi, "On Capital Flows and Macroeconomic Performance: Evidence Before and After
the Financial Crisis in Turkey", Presented at ERF 17th Annual Conference in Turkey, 20th-22th March 2011.
[17] J-P. Allegret, and M. T. Benkhodja, "External Shocks and Monetary Policy in a Small Open Oil Exporting Economy",
EconomiX Working Paper, No. 2011-39, September 2011.
[18] G. Adler, and C. E. Tovar, "Riding Global Financial Waves: The Economic Impact of Global Financial Shocks on Emerging
Market Economies", IMF Working Paper, No. 12/188, July 2012.
[19] I. A. Kazi, H. Wagan, and F. Akbar, "The changing international transmission of us monetary policy shocks: is there
evidence of contagion effect on OECD countries", EconomiX Working Paper, No. 2012-27, 2012.
[20] J-P. Allegret, C. Couharde, and C. Guillaumin, "The Impact of External Shocks in East Asia: Lessons from a Structural VAR
Model with Block Exogeneity", EconomiX Working Paper, No. 2012-01, 2012.
[21] M. Obstfeld, "The Global Capital Market: Benefactor or Menace?", NBER Working Paper, No. 6559, May 1998.
[22] W. Buiter, and A. Taci, "Capital account liberalization and financial sector development in transition countries", in Age F.
P. Bakker and Bryan Chapple, eds., Capital Liberalization in Transition Countries: Lessons from the Past and for the
Future, Edward Elgar, Cheltenham, UK, 2003.
[23] P-R. Agénor, "Benefits and costs of international financial integration: theory and facts", Policy Research Working Paper,
No. 2699, The World Bank, pp. 01-62, October 2001.
[24] L. Martinez, A. Poli, K. Cheklat, H. Ben Maimoun, and M. Rendon, "Le Maroc, l’Union du Maghreb Arabe et l’intégration
régionale", EuroMeSCo Paper, No. 67, 2008.
[25] The African Development Bank Report, "L’effet de la crise financière mondiale sur l’Afrique", ADB Working Papers
Series, No. 96, Tunisia, March 2009.
[26] G. C. Hufbauer, and B. Claire, "Maghreb Regional and Global Integration: A Dream to be Fulfilled", Policy Analyses in
International Economics, No. 86, Peterson Institute for International Economics, October , 192 pp, 2008.
[27] P-R. Agénor, "Benefits and costs of international financial integration: theory and facts", Policy Research Working Paper,
No. 2699, The World Bank, pp. 01-62, October 2001.
[28] J. Williamson, and M. Molly, "A Survey of Financial Liberalization", Essay in International Finance, No. 211, Princeton
University, pp. 01-84, November 1998.
[29] B. Eichengreen, and M. Mussa, "Capital Account Liberalization and the IMF", Finance and Development Magazine, IMF,
Vol. 35, No. 4, pp. 16-19, December 1998.
[30] S. Zenasni and A. Benhabib, "The effects of external shocks on financial integration project in Maghreb countries", 33rd
Annual Meeting of the Middle East Economic Association (MEEA), San Diego University, January 2013.
[31] L. Martinez, A. Poli, K. Cheklat, H. Ben Maimoun, and M. Rendon, "Le Maroc, l’Union du Maghreb Arabe et l’intégration
régionale", EuroMeSCo Paper, No. 67, 2008.
[32] M. Russo, and P. Ugolini, "Financial Sector Challenges in Africa's Emerging Markets", Emerging Market Forum, EMF
paper series, 2008.
[33] A. Tahari, P. Brenner, E. De Vrijer, M. Moretti, A. Senhadji, A. Sensenbrenner, and J. Solé, "Financial Sector Reforms and
Prospects for Financial Integration in Maghreb Countries", IMF Working Paper, WP/07/125, May 2007.
[34] S. Zenasni and A. Benhabib, "Foreign Direct Investment, Financial Integration, and Growth: Panel Data Analysis for
North African Countries", The 12th Annual GEP Postgraduate Conference 2013, University of Nottingham, United
Kingdom, March 2013.
[35] S. Akhtar, and M. Rouis, "Economic Integration in MENA: the GCC, the Maghreb, and the Mashrek", The MENA Quick
Notes Series, No. 33, October 2010.
[36] H. Ito, and M. D. Chinn, "Notes on the Chinn-Ito Financial Openness Index, 2010 Update", March 2012. [Online]
Available: http://web.pdx.edu/~ito/Chinn-Ito_website.htm (2012).
[37] A. F. Darrat, and A. Pennathur, "Are the Arab Maghreb countries really integratable: Some evidence from the
cointegrated systems, Review of Financial Economics, No. 11, pp. 79-90, 2002.
[38] The World Bank Report, "Economic Integration in the Maghreb", The World Bank Middle East and North Africa Region,
October, Washington DC, 2010.
[39] M. Russo, and P. Ugolini, "Financial Sector Challenges in Africa's Emerging Markets", Emerging Market Forum, EMF
paper series, 2008.
[40] T. Bayoumi, and B. Eichengreen, "Shocking Aspects of European Monetary Unification", NBER Working Paper, No. 3949,
January 1992.
The Effects of External Financial Shocks on Financial Integration and Economic Growth: A VAR Approach for Maghreb
Countries
ISSN : 2028-9324 Vol. 3 No. 2, June 2013 418
[41] A. Benhabib, A. Benamar, and S. Maliki, "The Optimal Currency Area and the GCC (Gulf Council Countries): Is there a
feasibility?", Presented at the Second Research Conference on Empirical Issues in International Trade and Finance,
Indian Institute of Foreign Trade, New Delhi, 16th and 17th December 2010.
[42] D. A. Dickey, and W. A. Fuller, "Likelihood ratio statistics for autoregressive time series with a unit root", Econometrica,
Vol. 49, No. 4, July, pp. 1057-1072, 1981.
[43] P. C. B. Phillips, and P. Perron, "Testing for a Unit Root in Time Series Regression", Biometrika, Vol. 75, No. 2, pp. 335-
346, June 1988.
[44] Lane P. R., and Milesi-Ferretti G. M. (2007), "The External Wealth of Nations Mark II: Revised and Extended Estimates of
Foreign Assets and Liabilities, 1970-2004", Journal of International Economics, Vol. 73, No. 2, pp. 223-250.
[45] J-P. Allegret, and M. T. Benkhodja, "External Shocks and Monetary Policy in a Small Open Oil Exporting Economy",
EconomiX Working Paper, No. 2011-39, September 2011.

Thank you for copying data from http://www.arastirmax.com