Financial Development and Economic Growth in the Mediterranean Associated Countries

Adolfo Barajas, Seyed Reza Yousefi
Content Type
Policy Brief
Slow growth in the Mediterranean Associated Countries (MEDA) over the past three decades can be partly traced to underperformance by the financial sector. Several countries in the region lack financial depth, and the region as a whole has not fully benefited from the level of banking intermediation on offer, signaling a “quality gap.” Policy should therefore aim to enhance banking competition by removing entry barriers and improving credit information, reduce the role of state banks, further the process of financial reform, and provide a financial infrastructure conducive to bank and financial market development. Moreover, quality of intermediation appears to be related to access, and MEDA countries have also underachieved in terms of providing access to financial services to large segments of the population, in particular, to small and medium-sized enterprises. Efforts to widen access should also lead to improvements in quality and, ultimately, higher longrun growth.
International Affairs
Political Geography