Measurement and Analysis of Macroeconomic (In)stability in North African Countries

This paper aims to analysis the macroeconomic (in)stability in four North African countries (Algeria, Egypt, Morocco, and Tunisia) covering the period 1999 to 2018 from the databases of World Bank (WDI). To achieve this purpose, we have modified the Macroeconomic Instability Index (MII) by adding a fifth variable to the four variables adopted in the previous economic literature. Also, the study investigates the major factors influencing macroeconomic stability for North African countries. The study uses the panel regressing approach especially; the Panel FGLS, which takes into account the fixed and random effects across countries and periods, and Panel FMOLS and DOLS which estimate and illustrate the long-term cointegration relationships. The results of measuring the stability index for the countries under study correspond to the facts and economic events that these countries witnessed during the study period, especially Egypt and Tunisia. The findings highlight, money supply, exports, and domestic investments have a strong statistically significant relationship with a negative sign while import has strong significant a positive effect on MII. According to the results achieved through standard economic analysis, along with some economic characteristics of North African countries, trade, investment and monetary policy are among the important factors in achieving macroeconomic stability. The study recommends economic policymakers in North African countries must work to enhance foreign trade, benefiting from the geographical location and based on the ingredients had by those countries, while identifying factors that promote exports.