Financial Openness and Financial Development in the South Mediterranean Sea Countries: Institutional Approach and Calculation ofm Development Thresholds
The central theme of the paper is the financial development issue in a context of financial globalization for the south Mediterranean sea (SMS) countries. The choice of this theme is motivated by the importance of the economic development and the growth in these countries, who are usually the subject of political instabilities, and are distinguished by weak political institutions. Our aim in this paper is to point out that the financial openness in the conditions of the SMS countries would be prejudicial for its financial development. In contrast, the financial openness would be beneficial for the financial development in the presence of the adequate legal and institutional development. This is our main hypothesis. To do so, we used an econometric panel error-correction model with nonoverlapping data for the period 1980-2005. The model links financial development indicators to institutional and legal indicators, in order to calculate institutional thresholds. The actual state of the institutional and legal environment in the region would not allow them to ameliorate the efficiency of their financial systems. Then, it's not recommended, if we trust on the results founded, to operate a financial openness. Instead of opening the "financial frontiers", it's better to prepare this transition by an improvement of the institutional and the legal environment.