nep-ara New Economics Papers
on MENA - Middle East and North Africa
Issue of 2016‒02‒29
ten papers chosen by
Paul Makdissi
Université d’Ottawa

  1. The effect of macroeconomic instability on FDI flows: A gravity estimation of the impact of regional integration in the case of Euro-Mediterranean agreements By CHENAF-NICET Dalila; ROUGIER Eric
  2. Build-Operate-Transfer Projects in Turkey: Contingent Liabilities and Associated Risks By Ilker Ersegun Kayhan; Glenn P. Jenkins
  3. Influencing Factors of Profitability on the Banking Industry : A case study of GCC countries. By ULLAH, NAZIM
  4. Is there a crowding-out effect in the Moroccan context ? Evidence from structural VAR Analysis By BOUNADER, Lahcen
  5. Market Power in the Poultry Sector in Turkey By Gokhan Ozertan; Sayed H. Saghaian; Hasan Tekguc
  6. The Potential Economic Impacts of the Proposed Development Corridor in Egypt: An Interregional CGE Approach By Diana N. Elshahawany; Eduardo A. Haddd, Michael L. Lahr
  7. Emergence of an automotive cluster in Tangier (Morocco) By BENABDEJLIL Nadia; LUNG Yannick; PIVETEAU Alain
  8. Regulatory Implications of FMS for Voice Services in Turkey: Analysis of Recent Regulatory Acts on Deregulation and Margin Squeeze By Ünver, Mehmet Bilal; Göktaylar, Yavuz; Tezel, Fatih
  9. Forecasting Inflation using Survey Expectations and Target Inflation: Evidence for Brazil and Turkey By Altug, Sumru G.; Cakmakli, Cem
  10. The Impact of the Fracking Boom on Arab Oil Producers By Kilian, Lutz

  1. By: CHENAF-NICET Dalila; ROUGIER Eric
    Abstract: In order to diversify their risks, firms facing uncertainty in their domestic market may choose to increase their investment abroad by transferring production to more stable host economies. By estimating a gravity model of foreign direct investment (FDI) flows from Europe and the Mediterranean region to the four main recipients of FDI in the Middle East and North Africa (MENA) region from 1985 to 2009, this article tests (1) the extent to which FDI inflows are affected by macroeconomic volatility in the source country and (2) whether regional trade and investment agreements could have increased this FDI sensitivity to source country’s macroeconomic volatility. We find that the incidence of FDI between two countries increases with source GDP instability and with host GDP stability. Moreover, FDI to MENA countries tends to be countercyclical with respect to the source country’s business cycle. We also find that although FDI reactivity to host country’s uncertainty is not conditioned by North-South trade and investment agreements, it becomes negative for South-South regional integration. Last, we show that although the source country’s instability certainly matters when explaining bilateral FDI flows in our sample, its impact may be less important when investments are driven by cost differentials, that is, for vertical investment.
    Keywords: Output volatility, FDI, gravity model, source country instability, European Union, Middle East and North Africa, regional trade integration, bilateral investment treaties, horizontal FDI, vertical FDI
    JEL: F21 F43 F4
    Date: 2016
  2. By: Ilker Ersegun Kayhan (Chevening/Abdullah Gül Research Fellow, Oxford Center for Islamic Studies, University of Oxford); Glenn P. Jenkins (Queen’s University, Canada and Eastern Mediterranean University, North Cyprus)
    Abstract: The government of Turkey actively promotes public-private partnership models in infrastructure projects. Public-private partnership implementation contracts risk incurring a heavy fiscal burden on the state through contingent liabilities. It is therefore important to distribute risk among contract parties, according to the risk-management capacities of each. In the context of Build-Operate-Transfer projects, governments are expected to cover political and force majeure risks, as well as to guarantee demand for the goods and/or services produced. In Turkey, however, the government also assumes responsibility for finance risk, construction risk, and availability risk, which are usually assumed by the private sector. This study presents an overview of the legal and institutional frameworks relevant to Build-Operate-Transfer projects in Turkey, assessing the explicit contingent liabilities and associated risks to formulate policy recommendations on the evaluation, monitoring, and management of such contingent liabilities and risks in line with international best practice.
    Keywords: Public-private partnerships, infrastructure, contingent liabilities, Turkey
    JEL: L33 G13 H54
    Date: 2016–01
    Abstract: The purpose of this study is to examine, evaluation and to see the impact of factors on profitability on banking industry and major differences of the performance in case of profitability of the banking industry (Islamic bank and the conventional bank) between bank-specific and macro-economic characteristics by using data of top twenty six Islamic banks and forty six conventional banks of GCC countries of 2014. In This study, I use Least Square (OLS) method to investigate the impact of assets, loans, equity, deposits, economic growth, inflation and market capitalization on major profitability indicators i.e., return on asset (ROA), and return on equity (ROE). Required data is collected from bank scope database. The empirical results have found strong evidence that only internal factors have strong influence on the profitability on banking sector whereas external factors have no influence on the profitability. In spite of time constrain, I tried at my best level to find out current situation of the profitability of the top selected Islamic and conventional banks of the six countries of the GCC that will helps the readers definitely.
    Keywords: Key words: Islamic Bank, Conventional Bank, Factors, Profitability, OLS, and GCC countries.
    JEL: D0 D00
    Date: 2016–01–31
  4. By: BOUNADER, Lahcen
    Abstract: This paper investigates the crowding out effect hypothesis in Morocco. Accordingly, the interest rate reacts to the change of the level of government spending. The Empirical results obtained from the impulse response analysis of the structural VAR model indicate the absence of such an effect. Spending in infrastructure, in communication and in welfare seem to build the basis of modern economy that will attract private investments, and the result will not be materialized in the immediat short term.
    Keywords: SVAR, Fiscal policy, Real interest rate.
    JEL: E22 E43 E62
    Date: 2016–01–18
  5. By: Gokhan Ozertan (Bogazici University); Sayed H. Saghaian (University of Kentucky); Hasan Tekguc (Mardin Artuklu Univeristy)
    Abstract: In 2009, the Competition Authority (CA) in Turkey penalized 27 broiler chicken producers for agreeing to restrict supply and controlling prices, hence, forming a cartel. The CA based its punishment decision on communication records among major broiler chicken producers, using raw price series and without any statistical or econometric analysis. In this research, time-series methods are employed to test directly for the presence of market power along the supply chain in the poultry sector for both demand and supply sides. The findings show that the retail price behavior in the poultry supply chain in Turkey is consistent with an oligopolistic market structure. Classification JEL: Q11, Q13
    Keywords: Market power, poultry, Turkey
    Date: 2014–04
  6. By: Diana N. Elshahawany; Eduardo A. Haddd, Michael L. Lahr
    Abstract: Egypt has proposed a new development corridor. A main component is a desert-based expansion of the current highway network. This network is founded on a 1200-kilometer north-south route that starts at a proposed new port near El-Alemein and runs parallel to the Nile Valley to the border of Sudan. It also includes 21 east-west branches that connect the main axis to densely populated cities on the Nile. The paper is a first attempt at an economic assessment of the impact of this proposed corridor. It uses an interregional computable general equilibrium (CGE) model developed and reported in a prior paper. Here, that model is integrated with a more detailed geo-coded transportation network model to help quantify the spatial effects of transportation cost change due specifically to changes in accessibility induced by the corridor. The paper focuses on the likely structural economic impacts that such a large investment in transportation could enable through a series of simulations related to the operational phase of the project.
    Keywords: Impact analysis; interregional CGE models; transport infrastructure; accessibility; Egypt
    JEL: R13 R42 C68
    Date: 2015–11–10
  7. By: BENABDEJLIL Nadia; LUNG Yannick; PIVETEAU Alain
    Abstract: The paper analyses the emergence of new automobile cluster in the region of Tangier (Morocco) associated to the location of a Renault assembly plant in 2012. It is based on a survey realized by a team of French and Moroccan researchers. It discusses the conditions of the location of the French carmaker, at the crossroads of its internationalisation strategy and of the industrialization policy of the Moroccan government for the Northern country. It studies the impact of this location on the supplier industry and on local employment, underlining the limits in terms of industrial development. Presently, it is more an agglomeration of automotive activities rather than a true integrated industrial cluster.
    JEL: F23 L52 L62 O14 R11 R23
    Date: 2016
  8. By: Ünver, Mehmet Bilal; Göktaylar, Yavuz; Tezel, Fatih
    Abstract: FMS (fixed-to-mobile substitution) has increasingly been echoed within the regulatory agenda of the global and domestic policy actors as the usage of mobile telephony has rapidly exceeded that of the fixed telephony in the last decade. In this line of thinking and upon the drastic changes in market figures, e.g., diminishing fixed subscriber number and traffic, Information and Communication Technologies Authority (ICTA), regulatory authority in Turkey has had a survey carried out across the country in 2013, primarily to evaluate the degree of FMS. The survey results demonstrated the existence of one-sided (or imperfect) FMS, which has been found to influence fixed access and calling markets so as to ensure that these two markets are more competitive under a forward-looking approach. Moreover, ICTA has advanced the wholesale regulations within the context of fixed call origination market by imposing margin squeeze remedy on the fixed incumbent (SMP operator). While the latter step is criticized as being in conflict with the deregulation decision, the nature of the remedy being on ex post basis could be speculated to eliminate the concerns to an extent. Aggravating the discussion, an interesting development during the course of ICTA’s intervention has happened in January 2015 when the SMP operator has increased its two retail prices so as to rearrange the margins. In this context, two questions arise from the discussions which extend to the philosophy of market regulation and deregulation: (i) First, does the regulator have a responsibility to pursue a regular (although being ex post) way of examining and when necessary intervening the incumbent’s retail prices despite the fact Competition Authority has opened investigations several times on the same issue. (ii) Would the exposed degree of FMS have had a driving role for deregulation of fixed access and calling markets, which are freed from regulation including margin squeeze remedy on a different route across EU, i.e. mostly inner-market (or VOB-driven) developments towards effective competition. In this paper, such debates are addressed under the light of the reasons that justify margin squeeze as well as deregulation acts issued both by the Turkish regulator itself and in general way of regulatory understanding, i.e. with a particular emphasis to EU perspective and implementation. It is elaborated whether the underlined concerns relating to the degree of market regulation are successfully sorted out and translated into regulatory practice, specifically when thought with Turkey-centric competition problems, i.e. predominant WLR type service-based models, diminishing fixed markets. After discussions, it is found that although belatedly imposed and accompanied by deregulation, such a remedy would serve as a check-balance tool for a transition period, but not suffice to cover all the long-term problems by itself in cases where competing operators have insufficient competitive tools in terms of replicability. Last but not the least it is concluded that although European way of deregulation draws a differing roadmap, EU-centric pillars for regulation are implicitly injected into the Turkish system, which tries to resolve the issue with a trade-off together with the little possibility of ruling in a regulatory vacuum. Should this and a comparable risk of regulatory opportunism be prevented, a hybrid and promising example would be mentioned under the context of deregulatory reform.
    Keywords: margin squeeze,deregulation,FMS,EU regulatory framework,market definition,fixed,mobile,voice,Turkey
    Date: 2015
  9. By: Altug, Sumru G.; Cakmakli, Cem
    Abstract: In this paper, we formulate a statistical model of inflation that combines data on survey expectations and the inflation target set by central banks.. Our model produces inflation forecasts that are aligned with survey expectations, thereby integrating the predictive power of the survey expectations together with the baseline model. We further incorporate the inflation target set by the monetary authority to examine the effectiveness of monetary policy in forming inflation expectations and therefore, predicting inflation accurately. Results indicate superior predictive power of the proposed framework compared to the model without survey expectations as well as several popular benchmarks such as the backward and forward looking Phillips curves and naive forecasting rule.
    Keywords: Inflation forecasting; inflation targeting; state space models; survey-based expectation; term structure of inflation expectations
    JEL: C32 C51 E31 E37
    Date: 2015–02
  10. By: Kilian, Lutz
    Abstract: This article contributes to the debate about the impact of the U.S. fracking boom on U.S. oil imports, on Arab oil exports, and on the global price of crude oil. First, I investigate the extent to which this oil boom has caused Arab oil exports to the United States to decline since late 2008. Second, I examine to what extent increased U.S. exports of refined products made from domestically produced crude oil have caused Arab oil exports to the rest of the world to decline. Third, the article quantifies by how much increased U.S. tight oil production has lowered the global price of oil. Using a novel econometric methodology, it is shown that in mid-2014, for example, the Brent price of crude oil was lower by $10 than it would have been in the absence of the fracking boom. I find no evidence that fracking was a major cause of the $64 decline in the Brent price of oil from July 2014 to January 2015, however. Fourth, I provide evidence that the decline in Saudi foreign exchange reserves between mid-2014 and August 2015 would have been reduced by 27 percent in the absence of the fracking boom.
    Keywords: Arab oil producers; oil price; oil trade; refined products; Saudi Arabia; shale oil; tight oil
    JEL: F14 Q33 Q43
    Date: 2016–02

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