FINANCIAL LIBERALIZATION AND ECONOMIC GROWTH: EVIDENCE FROM TUNISIA

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

References

1. AMABLE B. ET CHATELAIN JB. (1995): «Systèmes financiers et croissance, les effets du «court termisme», Revue Economique, n° 3, pp: 827-836.
2. AMABLE B. ET CHATELAIN JB. (1995): « Efficacité des systèmes financiers etdéveloppement économique », Economie Internationale, n°61, 1ier trimestre, pp: 99- 130.
3. AMAIRA B. (2003) : «Libéralisation financière et croissance économique : Approche en données de panel », Communication lors de la 20ièmes Journées Internationales d’Economies Monétaire et Financière, BIRMINGHAM, 5 et 6 juin 2003, 20p.
4. ANWER M.S. AND SAMPATH R.K. (2001): « Exports and Economics Growth », Indian Economic Journal, Vol. 47, No. 3, pp: 79-88.
5. BERTHELEMY J.C ET VAROUDAKIS A. (1998) : « Développement financier, Réformes financières et croissance : une approche en données de panel », Revue Economique, Vol. (49), n° 1, pp: 195-206.
6. BERTHELEMY J.C. ET VAROUDAKIS A. (1996) : « Politiques de développement financier et croissance », centre de développement de l’OCDE, Paris.
7. BERTHELEMY J.C ET VAROUDAKIS A. (1994) : « Intermédiation financière et croissance endogène », Revue Economique, Vol (45), pp: 737-750.
8. DARRAT F.A. (1999): « Are financial deepening and economic growth causally related? Another look at the evidence », International Economic Journal, Volume 13, Number 3, autumn, pp. 19-35.

9. DEMIRGUC-KUNT A. ET DETRAGIACHE E. (1998): «Financial Liberalization and financial fragility », IMF Working paper series / WPS 1917, 48p.
10. DORNBUSH R. AND REYNOSO A. (1989): «Financial factors in economic development», American Economic Review, Vol. 79, N° 2, pp: 204-209.
11. HABIBULLAH M.S. (1999): « Financial development and economic growth in Asian countries: testing the financial-led growth hypothesis », Saving and development, t. XXIII, No. 3, pp: 279-291.
12. KHAN A. AND HASAN L. (1998): «financial liberalization, savings, and economic development in Pakistan », Economic Development and Cultural Change, Vol. 46,n°3, pp: 581-598.
13. LAEVEN L. (2000): «Financial liberalization and financing constraints: evidence from panel data on emerging economics», The World Bank Working Paper n° 2467, 50p.
14. LAROCHE A., LEMOINE E., MILLIEN A., PARTS F. ET ZHANG YJ. (1995) : « Croissance, marchés financiers : Une approche empirique », Economie Internationale Revue du CEPII, N°64,4ième trimestre, pp: 39-60.
15. LEAHY M. AND AL. (2001): « Contribution of financial systems to Growth in OECD countries », OECD, Economics department, Working papers, n° 280, 15 p.
16. LEVINE R. AND ZERVOS S. (1998): «Stock markets, Banks and Economic Growth», The American Economic Review, June, pp: 537-558.
17. MCKINNON R.I. (1973): « Money and capital in economic development », The Brookings Institution, Washington.
18. MORISSET J. (1993): « Does financial liberalization really improves private investment in developing countries? », Journal of Development Economics, Vol. 40, pp: 133-150.
19. PATRICK H. (1966): «Financial Development and Economic Growth in Underdeveloped Countries », Economic Development and Cultural Change, n° 14, pp: 174-189.
20. RAJAN R. AND ZINGALES L. (1998): « Financial dependence and growth », American Economic Review, Vol. 88, N°3, p. 559-586.
21. ROUBINI N. AND SALA-I-MARTIN X. (1992): « Financial Repression and Economic Growth», Journal of Development Economics, Vol. (39), pp: 5-30.
22. SHAW E.S. (1973): «Financial Deepening in Economic Development», Oxford University Press, New York.
23. SHRESTHA MIN B. AND CHOWDHURY K.H. (2006): « Financial Liberalization Index for Nepal », International Journal of Applied Econometrics and Quantitative Studies, Vol.3-1, pp: 41-54.
24. THORNTON J. (1994): « Financial deepening and economic growth: evidence from Asian economies », Saving and Development, No. 1, XVIII, pp: 41-51.