11. Capital Markets Development and Economic Growth in North Africa

The study uses panel data for the period 2010–2021 to determine whether there is a long-run cointegration relationship between real output growth and capital market development in, Egypt, Morocco, and Tunisia. Using the ARDL and the Markov Switching Regression, the study finds that capital market development measured with market capitalization is positively and significantly related to real GDP growth in the selected North African countries. The error correction term is negative and significant, indicating the subsequent corrections of the deviations of real GDP growth from the long-term value. The paper suggests the need for an expansion and enhancement of capital markets in financing the economies of the selected countries.