Institutional environment, banking stability and economic growth in the Middle East and North Africa.

Summary The Middle East and North Africa (MENA) region has witnessed institutional and financial reforms aimed at promoting economic development. While traditional theories focus on capital accumulation and technical progress as fundamental explanatory factors of economic growth, the work giving rise to the "new institutional economics" has emphasized the major contribution of institutional development to economic growth. The objective of this thesis is to understand the role of institutional quality and banking regulation in explaining financial development and economic growth in MENA countries since the 1980s. Using appropriate econometric modeling, the thesis seeks to answer the following three main questions: What role do institutional quality and banking regulation play in explaining variations in capital, risk and banking efficiency in the MENA banking system? Is there a significant effect of institutional development on banking and economic development? To what extent can cross-country differences in economic performance be explained by institutional factors? The main findings of the thesis are that: (i) institutional quality has a significant effect on capital, risk taking and efficiency of banks operating in the MENA region. (ii) banking regulation has a positive and significant effect on banking development, and there is a positive and significant interdependence between economic development and banking development. (iii) the effect of institutional quality on countries with low economic growth on average is stronger than the effect on countries with high economic growth.