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AEC 2008 - Financial Sector Development

30-Nov-2008

This study analyses the effects of financial openness on productive efficiency and technology catch-up in four countries in the Mediterranean Basin (Algeria, Egypt, Morocco, and Tunisia) as compared to the situation about the same in a group of developed countries (France, Germany, Japan, and the UK) over the 1985-2005 period. The two regions are abbreviated AEMT and FGJU respectively. Using the stochastic production frontier method with variable inefficiency (Battese and Coelli 1995) and the metafrontier technique (Battese et al. 2004), we show, with the exception of Tunisia, that the productive efficiency of the countries under consideration has continuously declined. We also identify an ever-widening technology gap for the AEMT countries caused by among other things, a slowdown in the opening-up of their financial systems from the second half of the 1990s.

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