Financial Development And Growth In Middle Eastern Countries

Abstract

This paper studies the relationship between financial intermediation and economic growth in a sample of Middle Eastern countries.  The results are consistent with the hypothesis that a well-functioning banking system promotes economic growth.  Moreover, the results suggest that market-specific factors may hinder financial markets’ ability to play hypothesized roles, while enhancing the role of intermediaries.  The paper’s general conclusion is that financial development does affect economic growth.  However, market specific factors affect the magnitude and significance of this effect.  The implication is that studies should control for market-specific factors to assess the relationship between financial development and growth.