Domestic Credit and the Balance of Payment Deficit: Evidence from a Heterogeneous Panel of Five Selected Mena Countries

This study investigated the relationship between domestic credit and net foreign assets in the long run through the monetary approach to the balance of payments (MABP) for a panel of five selected MENA countries (Jordan, Egypt, Algeria, Morocco, Tunisia) during the period extending from 1980 to 2019...

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Autores principales: Ghilous Azeddine, Ziat Adel
Formato: article
Lenguaje:EN
Publicado: Sciendo 2021
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Acceso en línea:https://doaj.org/article/c48a35421b6f49e6a7d12b89d0b206b5
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spelling oai:doaj.org-article:c48a35421b6f49e6a7d12b89d0b206b52021-12-05T14:11:06ZDomestic Credit and the Balance of Payment Deficit: Evidence from a Heterogeneous Panel of Five Selected Mena Countries2256-039410.2478/eb-2021-0009https://doaj.org/article/c48a35421b6f49e6a7d12b89d0b206b52021-01-01T00:00:00Zhttps://doi.org/10.2478/eb-2021-0009https://doaj.org/toc/2256-0394This study investigated the relationship between domestic credit and net foreign assets in the long run through the monetary approach to the balance of payments (MABP) for a panel of five selected MENA countries (Jordan, Egypt, Algeria, Morocco, Tunisia) during the period extending from 1980 to 2019. It employed the second-generation methods in panel data analysis to deal with cross-sectional dependence (CSD) and slope heterogeneity. According to the panel results for Common Correlated Effects Mean Group (CCEMG) and Augmented Mean Group (AMG) estimators, domestic credit has a significant negative impact on net foreign assets in the long run. The country-specific results for the AMG estimator strongly supported the MABP propositions in Jordan, Morocco, and to a lesser extent, in Egypt and Algeria. As for Tunisia, the results do not conform with what MABP predicted. The implicit conclusion is that an increase in domestic credit causes a continuous loss of net foreign assets in Egypt, Jordan, Morocco, and Algeria. Thus, monetary authorities should formulate an appropriate monetary policy to control the domestic credit creation as a mechanism toward improving the balance of payment (BOP) position. Furthermore, the policymakers should concentrate on other policy instruments to correct the BOP deficit rather than focusing on monetary tools, especially in Tunisia, where the findings showed that BOP was not a monetary phenomenon.Ghilous AzeddineZiat AdelSciendoarticlebalance of paymentsmonetary approachcross-sectional dependenceheterogeneous panelaugmented mean group (amg)c31c33e12e42BusinessHF5001-6182Economics as a scienceHB71-74ENEconomics and Business, Vol 35, Iss 1, Pp 133-148 (2021)
institution DOAJ
collection DOAJ
language EN
topic balance of payments
monetary approach
cross-sectional dependence
heterogeneous panel
augmented mean group (amg)
c31
c33
e12
e42
Business
HF5001-6182
Economics as a science
HB71-74
spellingShingle balance of payments
monetary approach
cross-sectional dependence
heterogeneous panel
augmented mean group (amg)
c31
c33
e12
e42
Business
HF5001-6182
Economics as a science
HB71-74
Ghilous Azeddine
Ziat Adel
Domestic Credit and the Balance of Payment Deficit: Evidence from a Heterogeneous Panel of Five Selected Mena Countries
description This study investigated the relationship between domestic credit and net foreign assets in the long run through the monetary approach to the balance of payments (MABP) for a panel of five selected MENA countries (Jordan, Egypt, Algeria, Morocco, Tunisia) during the period extending from 1980 to 2019. It employed the second-generation methods in panel data analysis to deal with cross-sectional dependence (CSD) and slope heterogeneity. According to the panel results for Common Correlated Effects Mean Group (CCEMG) and Augmented Mean Group (AMG) estimators, domestic credit has a significant negative impact on net foreign assets in the long run. The country-specific results for the AMG estimator strongly supported the MABP propositions in Jordan, Morocco, and to a lesser extent, in Egypt and Algeria. As for Tunisia, the results do not conform with what MABP predicted. The implicit conclusion is that an increase in domestic credit causes a continuous loss of net foreign assets in Egypt, Jordan, Morocco, and Algeria. Thus, monetary authorities should formulate an appropriate monetary policy to control the domestic credit creation as a mechanism toward improving the balance of payment (BOP) position. Furthermore, the policymakers should concentrate on other policy instruments to correct the BOP deficit rather than focusing on monetary tools, especially in Tunisia, where the findings showed that BOP was not a monetary phenomenon.
format article
author Ghilous Azeddine
Ziat Adel
author_facet Ghilous Azeddine
Ziat Adel
author_sort Ghilous Azeddine
title Domestic Credit and the Balance of Payment Deficit: Evidence from a Heterogeneous Panel of Five Selected Mena Countries
title_short Domestic Credit and the Balance of Payment Deficit: Evidence from a Heterogeneous Panel of Five Selected Mena Countries
title_full Domestic Credit and the Balance of Payment Deficit: Evidence from a Heterogeneous Panel of Five Selected Mena Countries
title_fullStr Domestic Credit and the Balance of Payment Deficit: Evidence from a Heterogeneous Panel of Five Selected Mena Countries
title_full_unstemmed Domestic Credit and the Balance of Payment Deficit: Evidence from a Heterogeneous Panel of Five Selected Mena Countries
title_sort domestic credit and the balance of payment deficit: evidence from a heterogeneous panel of five selected mena countries
publisher Sciendo
publishDate 2021
url https://doaj.org/article/c48a35421b6f49e6a7d12b89d0b206b5
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