The effect of Financial and non-Financial variables on economic growth; a study on Middle East Countries

The aim of this study is to find the dynamic relationship between financial, non-financial, and economic growth in ۸ Middle east countries with mid and low-income levels for the ۱۵ years from ۲۰۰۵ to ۲۰۱۹. This study uncovers the causality relationship among indicators using the panel vector auto-regressive (VAR) and vector error correction model (VECM) approach. The results demonstrate that insurance asset size and international tourism are significant causative factors in both the long and short run on the economic growth of the countries under study, as they are cointegrated and affect each other in the long run. Moreover, other financial variables, including liquid liabilities and final consumption expenditure, are also found to have a granger cause in economic growth. In addition to financial variables, non-financial factors such as interest rate, secondary school, and unemployment rate are significant causal factors in economic growth. Also, the impulse response function also reveals that GDP initially responds negatively to shocks in all variables. However, in the long run, it becomes positively responded to reach the equilibrium, whereas the scenario is reversed for unemployment. Overall, this paper provides valuable insights into the relationship between financial, non-financial, and economic growth in Middle-east countries with mid and low levels of income, which could inform policymakers and researchers interested in the economic development of these countries. The findings suggest that policymakers should focus on enhancing financial and non-financial sectors in order to grow the economy as these are the causative factor for economic growth.

کلیدواژه ها:

Panel data ، vector auto-regressive (VAR) ، vector error correction model (VECM) ، Granger-Causality ، Financial variables ، Non-financial variables