Abstract:

This paper investigates the relationships between financial development (FD), institutions and economic growth on a panel of four North African countries (Tunisia, Morocco, Algeria and Egypt), over a 5-year period from 1996 to 2015. Using the dynamic generalized method of moments (GMM) in a panel data analysis, we found that FD has a positive effect on economic growth. We also found that institutions appear to be working as a complement to FD and, that the effect of FD is more pronounced in the presence of the institutional quality variable. As a policy implication, we recommend that policy makers place special importance on implementing policies that result in the deepening of financial systems, including a sound institutional framework. Thus, by promoting the development of a country’s financial system, economic growth will be accelerated.

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