Mr. Philip Barrett, Mariia Bondar, Sophia Chen, Miss Mali Chivakul, and Ms. Deniz O Igan
Using a new daily index of social unrest, we provide systematic evidence on the negative impact of social unrest on stock market performance. An average social unrest episode in an typical country causes a 1.4 percentage point drop in cumulative abnormal returns over a two-week event window. This drop is more pronounced for events that last longer and for events that happen in emerging markets. Stronger institutions, particularly better governance and more democratic systems, mitigate the adverse impact of social unrest on stock market returns.
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper analyzes the various transmission channels of the Syrian crisis—though quantification is hampered by the lack of reliable data—with focus on the impact on fiscal performance and labor markets; it also takes stock of international donor efforts to date. The paper also provides overviews of main effects on Lebanon’s economy, the expenditure pressures associated with the refugee presence, the impact on poverty and inequality, and the added strains on labor markets. A section of the paper describes the response by the international community to help Lebanon cope with the Syrian crisis. Absent additional international support, the needs of both refugees and affected Lebanese communities will not be met. Sound government policies—including implementation of a concerted policy framework to deal with refugee issues and a commitment to fiscal discipline—will send credible signals to donors and help mobilize budget support. Tackling the unprecedented refugee crisis requires strong international support. There has been a large international humanitarian response, but much more is needed.
Mr. Sami Ben Naceur, Barbara Casu, and Hichem Ben-Khedhiri
This study examines the effect of financial-sector reform on bank performance in selected Middle Eastern and North African (MENA) countries in the period 1994 -2008. We evaluate bank efficiency in Egypt, Jordan, Morocco, Lebanon and Tunisia by means of Data Envelopment Analysis (DEA) and we employ a meta-frontier approach to calculate efficiency scores in a cross-country setting. We then employ a second-stage regression to investigate the impact of institutional, financial, and bank specific variables on bank efficiency. Overall, the analysis shows that, despite similarities in the process of financial reforms undertaken in the five MENA countries, the observed efficiency levels of banks vary substantially across markets, with Morocco consistently outperforming the rest of the region.Differences in technology seem to be crucial in explaining efficiency differences. To foster banking sector performance, policies should be aimed at giving banks incentives to improve their risk management and portfolio management techniques. Improvements in the legal system and in the regulatory and supervisory bodies would also help to reduce inefficiency.
Similar to other emerging economies, the Egyptian stock market has recently experienced a remarkable run-up but also a major downturn. This paper analyzes the stock market from two angles. First, it compares the performance of the major stock price index with its underlying fundamentals. Second, it explores the relationship between the Egyptian and other stock markets. The paper finds that (i) there is some evidence against a stable relationship between the Egyptian index and its fundamental value; and (ii) short-term correlations and long-term cointegrating relations provide conflicting signals on the value of Egyptian stocks as a means of diversification.
In this paper, we assess the macroeconomic determinants of stock market capitalization in a panel of 17 countries in the Middle East and Central Asia, including both hydrocarbon-rich countries and economies without sizeable natural resource wealth. In addition to traditional variables, we include an institutional variable and remittances among the regressors. We find that (i) both institutions and remittances have a positive and significant impact on market capitalization; and (ii) both regressors matter, especially in countries without significant hydrocarbon sectors; whereas (iii) in resource-rich countries, stock market capitalization is mainly driven by the oil price.
The paper examines the behavior of stock returns in the Egyptian stock exchange, the efficiency of the market in pricing securities, and the relationship between returns and conditional volatility. GARCH(p,q)-M models estimated for the four best known daily indices indicate significant departures from the efficient market hypothesis; the tendency for returns to exhibit volatility clustering; and a significant positive link between risk and returns, which was significantly affected during the market downturn that followed the introduction of circuit breakers in the form of symmetric price limits on individual shares.
This seminar volume, edited by Said El-Naggar, examines the challenge that Arab countries with large public sectors face in placing the privatization process within the wider context of structural change.