Abstract This paper examines whether the association between financial risk and firm profitability differs between a frontier and an emerging market, using panel data from the Palestinian Stock Exchange (PEX) and Borsa Istanbul (BIST), 2010–2024. Return on assets (ROA) is the preferred outcome, since earnings per share is not directly comparable across the two markets’ currencies and inflation regimes; EPS is retained as a secondary outcome. Earnings volatility is measured as the rolling standard deviation of EBIT divided by total assets. A Hausman test favors firm and year fixed effects over random effects, the preferred specification throughout. The central specification tests whether the earnings-volatility-profitability association differs between the two markets. Earnings volatility is positively associated with profitability in both markets, but the association is significantly weaker in the frontier market, an attenuation rather than a reversal of sign. This is consistent with, though it does not establish, the hypothesis that limited risk-absorption capacity in frontier markets may weaken this link. The pattern holds across alternative volatility windows and outcome variables, though not under the shortest window tested. Variance inflation factors are assessed using the conventional threshold of 10. The analysis is descriptive; no causal claim is made.
Abstract This paper investigates the determinants and dynamics of labour demand and specifically informal labour in Egypt’s manufacturing sector, using nationally representative firm-level data from the 2020/21 Egyptian Industrial Firm Behavior Survey. Applying ordinary least squares and fractional logit models, we analyse total employment, the share of informal labour, and its average annual change over the firm life cycle. Three key findings emerge. First, employment is positively associated with capital, exporting, technology adoption, innovation, industrial zones, worker training, and managerial education, and negatively associated with sole proprietorships, wages, and total factor productivity. Second, informal employment is more common among private sector firms, sole proprietorships, and firms using more part-time workers, and less prevalent among firms adopting technology or led by more educated managers. Third, changes in informality over time are modest: most formal firms exhibit no change in the share of informal workers. Notably, formal firms that did not initially employ informal labour tend to increase their informal share, while firms that formalised continue to rely heavily on informal employment. Together, these findings underscore the persistence of informality and limited transitions towards full formalisation within Egypt’s formal manufacturing sector.
Abstract Broadband connectivity is an important component of national economic infrastructure. However, empirical evidence on the relationship between broadband connectivity and economic performance remains limited for the Middle East and North Africa (MENA) countries. We examine the association between broadband connectivity and GDP per capita across 17 MENA economies from 2004 to 2023. We account for endogeneity, unobserved country-specific heterogeneity, and the dynamic nature of economic growth. The study employs the Arellano-Bond difference GMM and Blundell-Bond system GMM estimators. Our findings provide suggestive evidence of a positive association between broadband connectivity and GDP per capita. However, this association is not robust across all specifications and remains sensitive to the estimator used. The Wald chi-square statistics indicate the joint significance of the regressors. However, the Sargan tests reject the overidentifying restrictions in the difference GMM and one-step system GMM specifications, raising concerns about instrument validity. The high Sargan p -value in the two step system GMM specification is therefore interpreted cautiously. We recommend that broadband investment be pursued as part of a wider development strategy. However, the results do not imply that broadband expansion will automatically lead to sustainable growth.
Abstract This paper examines the risk dependence between clean energy, oil prices and GCC stock markets over the period 2013–2023, covering the two recent events of the COVID-19 pandemic and Russia-Ukraine conflict. The main purpose is to investigate the volatility spillovers between clean energy, fossil fuel markets and GCC stock indices. We employ two methodologies namely the Diebold, F. X., and K. Yilmaz. 2012. “Better to Give than to Receive: Predictive Directional Measurement of Volatility Spillover.” International Journal of Forecasting 28: 57–66, Diebold, F. X., and K. Yilmaz. 2014. “On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms.” Journal of Econometrics 182: 119–34, Diebold, F. X., and K. Yilmaz. 2015. “Trans-Atlantic Equity Volatility Connectedness: U.S. and European Financial Institutions, 2004-2014.” Journal of Financial Econometrics 14: 81–127 volatility spillover index and wavelet coherence analysis. The Diebold-Yilmaz connectedness results show that oil prices, KSA and Kuwait stock markets are net transmitters of shocks while the clean energy index and the stock markets of the UAE, Qatar, Bahrain and Oman are net receivers of volatility. The wavelet coherency findings reveal that the dependence between clean energy/oil prices and the stock markets varies across time scales and countries. Strong coherence is observed during the oil price crash and the COVID-19 crisis at low frequencies (high scales). The findings have several practical implications for investors and portfolio managers. The results suggest that GCC investors may benefit from including either clean energy or crude oil in their stock portfolios to reduce portfolio risk. The estimated hedge ratios indicate that both clean energy and crude oil can serve as effective hedging instruments. Moreover, the hedging effectiveness results show that incorporating clean energy, rather than crude oil, into stock portfolios leads to a greater reduction in portfolio risk.
Abstract This paper examines how leadership gender configurations shape digitalisation and innovation in Egyptian manufacturing. Using the 2020/21 Egyptian Industrial Firm Behavior Survey (EIFBS) covering 2,338 firms, we construct a four-category gender variable (female owners and male managers (FOMM), male owners and female managers (MOFM), female owners and female managers (FOFM) and all-male baseline) and analyse how these owner–manager gender mixes relate to the adoption of digital technologies (DT) and to innovation outputs, and how these relationships vary by firm size and DT use. Our analysis suggests that firms with male owners and female managers (MOFM) are most likely to adopt DT across specifications. The cross-sectional data suggests that mixed-gender firms are associated with a higher probability of spending on R&D, but not with higher innovation outputs in firms with female owners (i.e. FOMM and FOFM) – pointing toward an innovation conversion gap in those firms. Heterogeneity results show that the MOFM adoption premium of DT and a negative association between FOMM and innovation are strongest in small firms. DT use moderates gender gaps: female-owned firms not using DT are significantly less likely than all-male firms to generate innovation outputs, but this penalty disappears when female-owned firms use DT. A combined size–sector analysis suggests that the divergence between MOFM and FOMM/FOFM is driven mainly by small food manufacturers, with average marginal effects elsewhere broadly comparable. The results highlight leadership composition as a correlate of technology adoption and the role of DT in converting innovation inputs into outputs.
Abstract This study examines how different sources of instability affect trade performance in the Middle East. The analysis distinguishes between violent conflicts – interstate wars and domestic conflicts – and exogenous global shocks. Using a panel dataset covering 17 Middle Eastern economies over the period 1970–2022, the study applies the Generalised Additive Model for Location, Scale and Shape (GAMLSS) with a Box–Cox–Cole–Green (BCCG) distribution to account for non-normal trade outcomes. This approach simultaneously estimates effects on the mean, volatility, and tail behaviour of trade share. The results reveal a heterogeneous pattern: wars and domestic conflicts significantly reduce trade share, while global crises temporarily increase it via a denominator effect during domestic economic contraction. Inflation is a critical determinant; a one-standard-deviation increase is associated with an estimated 35.8 % decline in trade share, while the onset of war reduces trade by 17.7 %. Findings further reveal a nonlinear relationship where high-inflation episodes disproportionately weaken trade. These results demonstrate that mean-based models underestimate economic costs by ignoring volatility and tail risk. These findings highlight the importance of distribution-sensitive modelling for understanding how shocks reshape trade dynamics in the Middle East and suggest that macroeconomic stabilization is vital for preserving trade integration during instability.
Abstract This study examines the relationship between economic activity, food production, and the incidence of violent conflict, using an instrumental-variable strategy to address potential endogeneity. Economic conditions are central to many theoretical explanations of violent conflict, yet their empirical estimation is complicated by endogeneity and reverse causality. To address this challenge, we employ climatic variables as instruments for economic and agricultural outcomes, exploiting exogenous variation in weather conditions to identify causal effects at the country level. We apply Probit and Instrumental Variable (IV) Probit models to a panel of 17 MENA countries, and we analyse the effects of GDP, food production indices, international aid, and natural resource rents on violent conflict incidence. We further extend the analysis using dyadic data to examine whether shared transboundary river basins are associated with a higher likelihood of violent conflict between country pairs. The results indicate that higher GDP, food production, and international aid are associated with a lower probability of violent conflict, whereas greater dependence on natural resource rents is associated with higher conflict risk. Moreover, conflict incidence tends to be higher in river-sharing basins, particularly where rivers cross national borders and involve upstream-downstream asymmetries. These findings highlight the importance of economic stability, food security, and cooperative water governance in mitigating violent conflict in the MENA region.
Abstract Foreign direct investment (FDI) plays a key role in long-term growth and structural transformation, yet the Middle East and North Africa (MENA) region continues to attract relatively modest FDI inflows despite extensive institutional and market-oriented reforms. The paper examines the long-run relationship between governance, economic freedom, and FDI in 12 MENA countries over the period 1995–2021 using parallel long-run specifications based on disaggregated institutional indicators. Using Pooled Mean Group (PMG) and Fully Modified Ordinary Least Squares (FMOLS) estimators within a panel cointegration framework, the analysis reveals heterogeneous long-run effects across institutional dimensions. Trade openness emerges as the most robust determinant of FDI, while monetary freedom is positively associated with FDI under FMOLS. Political stability consistently promotes FDI inflows. An interaction model distinguishing oil-exporting from oil-importing economies yields convergent long-run results, indicating that the estimated relationships are not driven by oil dependence. By moving beyond composite indices and short-run analyses, the study provides new long-run evidence that stability and openness, rather than institutional form, drive foreign investment in the MENA region.
Abstract This study constructs a multidimensional inclusive growth (IG) index for Egypt (1990–2023), following McKinley’s (2010. Inclusive Growth Criteria and Indicators: An Inclusive Growth Index for Diagnosis of Country Progress . Asian Development Bank) methodology, and empirically analyzes its macroeconomic drivers using the unrestricted-error-correction autoregressive distributed lag (UEC-ARDL) model. Findings indicate that public education spending is ineffective, while population growth exerts a significant negative impact on inclusive growth. However, the interaction between population growth and education spending is insignificant, suggesting that current education investment does not mitigate demographic pressures. Financial deepening proves detrimental due to credit misallocation, and the contributions of foreign direct investment (FDI) and trade are constrained by weak absorptive capacity and insufficient integration into global value chains. The core contribution is this integrated empirical analysis, which moves beyond measurement to show that Egypt’s path to inclusive growth requires a fundamental policy shift from quantitative expansion to qualitative reforms: prioritizing education efficacy, strategic demographic management, and reorienting finance toward productive sectors to build the domestic capabilities needed to leverage global investment.
Abstract Despite decades of foreign direct investment promotion and export diversification initiatives, productivity growth in the Middle East and North Africa has remained disappointing. We study the joint dynamics of total factor productivity, foreign direct investment, and export diversification in MENA economies over 1995–2021, combining panel vector autoregression with country-level local projections. Three results emerge: foreign direct investment modestly increases export diversification but generates little evidence of productivity spillovers; productivity innovations remain self-driven. Diversification shocks are followed by short-run efficiency losses, consistent with adjustment costs and reallocation toward lower-productivity activities before learning occurs. These average effects conceal marked heterogeneity: oil exporters exhibit weak cross-variable transmission consistent with enclave structures, whereas non-oil economies display more active but fragile interactions that dissipate over time. State-dependent analysis further reveals that transmission mechanisms weaken noticeably during the Arab Spring period, with the affected economies exhibiting a near-complete breakdown in cross-variable dynamics. By modeling productivity, investment, and diversification as an endogenous system, we show that regional averages mask fundamentally different transmission mechanisms. The findings suggest that foreign direct investment and diversification strategies require complementary reforms strengthening absorptive capacity and domestic linkages to translate external inflows into durable productivity gains.
The paper examines the reasons for growth erosion in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region in the period preceding the Covid-19 crisis. Over the past two decades before the crisis the regions’ growth has been lower relative to its peers, despite facing similar circumstances as those countries, such as low oil prices and weak external demand. The paper argues that key reasons for growth erosion in MENAP have been domestic, primarily negative total factor productivity, weak preparedness for shocks, insufficient fiscal buffers, unsystematic fiscal adjustment with arbitrary cuts in investment, and low investment efficiency. External factors—the decline in oil and other commodity prices, weak external demand, and geopolitical tensions—have also been important, but mainly for oil exporters. Key policy options to reinvigorate growth include leveraging technology and trade to improve productivity, developing a macroeconomic risk management system, implementing growth-friendly fiscal adjustment, improving growth inclusiveness, and fostering the private sector.
This study investigates the impact of financial inclusion on bank stability in the MENA region over the period 2004–2022, using a panel of 201 banks from 15 MENA countries. Three multidimensional proxies for financial inclusion are constructed using data from the IMF Financial Access Survey. The study employs the two-step system generalized method of moments (GMM) and quantile regression to ensure the robustness of results. The findings consistently reveal a negative and statistically significant relationship between financial inclusion and bank stability, suggesting that expanding access to financial services may increase instability when not supported by adequate financial literacy and regulatory safeguards. In addition, the results show that bank-specific factors such as credit risk, cost-efficiency, size, and income diversification significantly affect stability. At the macro level, GDP per capita was found to be negatively associated with stability, while governance indicators showed to have constructive influence. The findings suggest that policymakers should adopt a cautious and sequenced approach to financial inclusion, ensuring that risk mitigation and consumer education mechanisms are in place before scaling up access.
This paper investigates the effects of international (IFI) and regional financial integrations (RFI) on structural domestic conditions represented by financial development and governance in Middle East and North Africa economies (MENA) during the 1992–2020 period. The generalized method of moments estimation results suggest that too much IFI deters while higher levels of RFI, measured based on bilateral financial flows, promote financial development. High levels of IFI and RFI both tend to be positively associated with institutional quality and governance. The empirical findings in this paper propose that MENA economies should engage in structural reforms, encompassing liberalization of capital accounts, eliminating barriers to regional financial integration, enhancing the institutional environment and financial development. In this vein, policymakers may be suggested to formulate strategies with the goal of maximizing the beneficial effects of both international and regional financial integrations.
This study examines the impact of technology usage on the gender wage gap in Egypt, analyzing wage disparities across three groups: technology professionals (ICT sector), technology users (non-ICT jobs utilizing digital tools), and nonusers (no technology engagement). Using the 2023 Egypt Labor Market Panel Survey (ELMPS), we estimate gender-disaggregated wage equations via Ordinary Least Squares (OLS) and Instrumental Variables Two-Stage Least Squares (IV-2SLS) to address endogeneity, and apply a two-step Heckman selection model to correct for employment selection bias. The Neuman–Oaxaca decomposition distinguishes explained and unexplained components of the gender wage gap. Results reveal that technology professionals exhibit a negligible gender wage gap, though unobserved factors, such as longer working hours, disproportionately favor men. Technology users show a modest gap driven by undervaluation of women’s skills and occupational segregation, while nonusers face a substantial wage gap (approximately 24 %) largely due to discrimination and structural barriers. These findings suggest that engagement with technology enhances women’s earning potential, yet persistent gender-based disparities remain outside technology-intensive roles. Policies promoting equitable access to digital skills, fair pay practices, and occupational integration are recommended to reduce wage inequalities.
This study explores the effects of foreign direct investment (FDI) and official development assistance (ODA) on financial inclusion across MENA countries from 1960 to 2023. Using a VAR model, we compute impulse response functions and variance decompositions. The findings show that, for most countries, FDI and ODA have minimal and short-lived effects on financial inclusion. However, Lebanon stands as an exception: financial inclusion (specifically FI_2) responds significantly and positively to an FDI shock, and the effect is more persistent compared to other countries. Variance decomposition further indicates that FDI shocks contribute the most to the forecast error variance of financial inclusion in Lebanon, highlighting the relatively stronger role of FDI in shaping its financial inclusion dynamics. Overall, the limited influence of external financial flows elsewhere in the region suggests that they are insufficient for sustained improvements in financial inclusion. Instead, domestic factors remain critical, as evidenced by the strong and stabilizing response of financial inclusion to its own shocks. These results underscore the need for internal resilience and tailored national policies to effectively enhance financial inclusion across MENA countries.
This study examines the distributional asymmetric effects of macroeconomic variables – per capita income, inflation, public education spending, domestic investment, and migrants’ remittances – on human capital formation in Egypt (1980–2023). Using the residual augmented least squares-Engle–Granger (RALS-EG) cointegration test and the quantile autoregressive distributed lag error-correction (QARDL-EC) model, the study explores short- and long-term dynamics across quantiles. Main findings indicate substantial distributional asymmetries: inflation and per capita income exert a pronounced impact on human capital at extreme quantiles, whereas their impacts are minimal at median quantiles. Domestic investment demonstrates no influence; however, remittances reveal a cumulative effect that becomes detrimental at high quantiles, indicating possible “brain drain” externalities. Public education expenditure exhibits significant distributional imbalance, highlighting inefficiencies in resource distribution. The study concludes that enhancing the efficiency of public education expenditures is more imperative than augmenting budgets. Furthermore, remittances must be purposefully allocated to productive expenditures, including vocational training, technology-oriented research and development, and skill enhancement, to alleviate negative impacts. It is essential aligning growth-oriented policies with macroeconomic stability measures, such as inflation targeting, for sustainable human capital development. This study innovatively constructs Egypt’s quantitative human capital index with Kraay’s (2018. “Methodology for a World Bank Human Capital Index.” In World Bank Policy Research Working Paper No. 8593 . Washington: World Bank) approach, providing new perspectives on human capital development in emerging economies.
This paper investigates the impact of the Covid-19 pandemic on the performance of Islamic insurance versus conventional insurance firms in the Organization of Islamic Cooperation (OIC) member countries. Using Dynamic Capabilities theory and Resource Dependence Theory, the study examines the reasons behind the more significant performance reduction in Islamic insurance firms during the pandemic. Using firm- and country-level panel data from 425 insurance firms for 7 years (2016–2022) and employing OLS, RE, and GMM regression models, the analysis focuses on Return of Assets (ROA) and Asset Turnover Ratio as performance measures. The results indicate that Islamic insurance firms exhibited a greater reduction in performance, during the pandemic, compared to conventional firms, primarily due to weaker liquidity management and operational flexibility. Cash from operating activities (COA) was the key factor of lack of liquidity management, contributing to the underperformance of Islamic insurance firms during the pandemic. The findings highlight the need for improved liquidity management approaches in Islamic insurance firms to increase their resilience to future economic shocks.
Evidence confirms that financial inclusion is a key enabler for economic growth and social development by deepening the financial system and reducing poverty and income inequality. However, its association with the financial stability of commercial banks remains inconclusive. Hence, this study is sought to examine the relationships between financial inclusion and the stability of the Ethiopian Banking Sector using a sample of 16 commercial banks. The study analyzed data spanning a period of 10 years, from 2013 to 2022, collected manually from the National Bank of Ethiopia and each commercial bank’s annual reports. Using the fixed effect method of panel data analysis, the results of this study showed that greater financial inclusion activities have a positive significant influence on banks’ Z-Score and a negative significant effect on the non-performing loan ratio of commercial banks in Ethiopia at 1 and 10 percent levels of significance. Concerning the effect of bank-specific control variables, the cost-efficiency ratio, return on assets, age, and size of banks significantly influenced the stability of banks with different signs. Banks in Ethiopia should increase their accessibility and level of penetration. By expanding their branch networks, ATMs as well as providing innovative financial products to customers given the positive contribution of enhanced financial inclusion in fostering bank stability.
Using the recently developed Global Economic Conditions Index, a time-varying Granger causality approach, as well as relying on the monthly dataset from January 2002 to June 2021, we investigate both symmetric and asymmetric causality between the Global Economic Condition Index and remittances in Lebanon, a small open economy significantly reliant on remittances. Rather than being asymmetric, we find a statistically significant, symmetric, time-varying causality between the Global Economic Conditions Index and remittances. Several robustness tests validate our findings. Given this finding, we propose relevant policy recommendations.
This study aims to detect the impact of the corporate governance structures on MENA banks’ stability and risk-taking. In particular, it aims at considering if bank type (conventional or Islamic) is a major determinant of the relationship between corporate governance, bank stability and risk-taking. The research adopts panel data econometrics on a sample containing the largest 100 MENA banks operating between 2011 and 2021. The empirical estimations examine the impact of board size, board independence, board gender diversity, role duality, the existence of risk, governance and nomination and remuneration committees as well as ownership blockholdings, on bank Z-scores and NPL ratios. The empirical results show that the exploited variables impact conventional and Islamic banks stability and risk differently. For instance, a larger board size has a positive effect on conventional bank stability, while it is irrelevant for Islamic banks. For role duality, the opposite findings have been observed. The risk committee plays an important role in Islamic banks risk mitigation, unlike the case of conventional banks. Finally, the existence of blockholdings poses considerable risk for conventional banks only.
