Financial Liberalization, Banking Crisis and Economic Growth in MENA Region: Do Institutions Matter?

The main purpose of this study is to investigate the interaction between financial liberalization, banking crisis and economic growth by taking into consideration the role of institutions. Our sample covers ten Middle East and North African (MENA henceforth) observed during the period 1990-2013. Using a dynamic panel data framework, our findings reveal that financial liberalization increases the likelihood of systemic banking crisis at the initial stages of financial reform, but there is a threshold level after which financial liberalization can have a positive impact on economic growth by reducing the probability of crisis. The results also suggest that all indicators of institutions play a less significant role in economic growth