MENA region remains at crossroads: a panel analysis modelling political stability and economic freedom to determine economic growth

Abstract

Political and economic instability have been among the most critical issues facing the Middle East and North Africa (MENA). This paper seeks to revisit the theoretical and empirical literature to assess the region’s economic growth indicators after more than 10 years of the Arab Spring events with the aim of assessing how political stability and higher scores of economic freedom affect economic growth in 14 MENA region countries over a time span of 20 years from 2001- 2021. The main econometric estimation uses the Arellano–Bover/Blundell–Bond model via a Generalized Method of Moments (GMM) estimator to address the endogeneity and reverse causality existing between political and economic freedom measures and economic growth. The main findings detect a positive relationship between political stability and economic growth across robust estimations, whereas a positive relationship was confirmed for most of the overall economic freedom index components to impact economic growth, namely, business freedom, investment freedom, and judicial effectiveness.