FINANCIAL LIBERALIZATION AND ECONOMIC GROWTH: EVIDENCE FROM TUNISIA

Year 2016, , 9 - 30, 31.10.2016

Amira Bouzid

https://doi.org/10.15637/jlecon.171

Abstract

The objective of this paper is to build an index of financial liberalization in Tunisia using the
Principal Component Analysis method over a period of 36 years from 1980 to 2015. In addition, this
paper also includes econometric estimates terms of cointegration and causality between financial
liberalization policy and economic growth in Tunisia. To do this, we adopt a methodology which is
based on an analysis in terms of causality. This approach requires passing through three stages. The
first step is to check the properties of time series (stationary and integration order) of the financial
liberalization index and economic growth through the use of unit root Dickey-Fuller tests. The second
step seeks to examine the long-term relationship between the two variables by using a multivariate
analysis Johansen. Finally, the third step seeks to determine the direction of causality between the
financial liberalization index and economic growth by applying a vector error correction model. The
results show that the two series are integrated of order one (I (1)), the existence of a long-term
relationship between the financial liberalization index and economic growth and the presence of
causality Granger unidirectional of financial liberalization index to economic growth. 

Keywords

Financial Liberalization Index, Economic Growth, Principal Component Analysis, Causality, Cointegration

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