Uncertainty, Economic Reforms and Private Investment in the Middle East and North Africa

Applied Economics, Vol. 41, No. 11, pp. 1379-1395, April 2009

Posted: 24 Sep 2009

See all articles by Ahmet Faruk Aysan

Ahmet Faruk Aysan

Bogazici University

Gaobo Pang

Marie-Ange Veganzones-Varoudakis

Cerdi-Université d'Auvergne - Clermont 1; National Center for Scientific Research (CNRS)

Date Written: April 2009

Abstract

During the 1980s and the 1990s, private investment in the Middle East and North Africa (MENA) has on average shown a decreasing or stagnant trend. This contrasts with the situation of the Asian economies, where private investment has always been more dynamic. In this article, it is empirically shown for a panel of 39 developing economies among which four MENA countries - that in addition to the traditional determinants of investment such as the growth anticipations and the real interest rate - government policies explain MENA’s low investment rate. Insufficient structural reforms, which have most of the time led to poor financial development and deficient trade openness have been a crucial factor for the deficit in private capital formation. The economic uncertainties of the region have represented another factor of the firm’s decisions not to invest. These uncertainties consisted of the external debt burden and various measures of volatility.

Keywords: Private Investment, Middle East, North Africa

JEL Classification: E2

Suggested Citation

Aysan, Ahmet Faruk and Pang, Gaobo and Veganzones-Varoudakis, Marie-Ange, Uncertainty, Economic Reforms and Private Investment in the Middle East and North Africa (April 2009). Applied Economics, Vol. 41, No. 11, pp. 1379-1395, April 2009, Available at SSRN: https://ssrn.com/abstract=1478028

Ahmet Faruk Aysan

Bogazici University ( email )

Bebek, İstanbul 34342
Turkey

Marie-Ange Veganzones-Varoudakis (Contact Author)

Cerdi-Université d'Auvergne - Clermont 1 ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

National Center for Scientific Research (CNRS)

3, rue Michel-Ange
Paris cedex 16, 75794
France

No contact information is available for Gaobo Pang

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