Does financial development foster growth in the Euro-Mediterranean region? A meta-analytic approach

The Euro-Mediterranean region has been characterized since Antiquity by intense exchanges. However, it remains highly heterogeneous in terms of economic and financial development, which is a challenge for identifying common underlying drivers of growth. Based on 351 estimates collected from 25 primary studies, we conduct a meta-analysis of the impact of financial development and liberalization on growth in the region. We find a gradation in both the magnitude and significance of the relationship: weaker in Europe, intermediate towards the Middle East, and stronger in North Africa. In Southern Mediterranean countries, the favorable effect is both greater and more significant. This result is robust to controls for publication bias. A Bayesian Model Averaging and Frequentist Model Averaging analysis supports the finding that being Mediterranean positively affects the nexus. The other most significant macroeconomic control variables are related to public policies. Controlling for trade openness and inflation has the expected significant effects. A less expected result is that controlling for education also has a strongly significant effect, presumably through both the endogenous growth and financial literacy channels. Finally, the number of citations seems to slightly hinder the relation between finance and growth in the region.