nep-ara New Economics Papers
on MENA - Middle East and North Africa
Issue of 2019‒06‒24
eight papers chosen by
Paul Makdissi
Université d’Ottawa

  1. Financial integration in the GCC region: market size versus national effects By Kerim Peren Arin; Guglielmo Maria Caporale; Kyriacos Kyriacou; Nicola Spagnolo
  2. Oil prices, US exchange rates, and stock market: evidence from Jordan as a net oil importer By Hammami, Algia; Ghenimi, Ameni; Bouri, Abdelfatteh
  3. Qatar; 2019 Article IV Consultation-Press Release; Staff Report By International Monetary Fund
  4. Qatar; Selected Issues By International Monetary Fund
  5. The Nexus of Irrigation-Water Salinity, Agricultural Policy and Long-Run Water Management: Lessons from the Case of Israel By Kan, Iddo; Slater, Yehuda; Reznik, Ami; Finkelshtain, Israel
  6. Who exits from a reforming sector? The case of dairy farmers in Israel By Kimhi, Ayal; Siminovich, Ortal
  7. On the Effectiveness of Price-Ceiling Regulations: The Case of Fluid-Milk Market in Israel By Bar-Nahum, Ziv; Finkelshtain, Israel; Kan, Iddo
  8. The Impacts of Climate Change on Cropland Allocation, Crop Production, Output Prices and Social Welfare in Israel: A Structural Econometric Framework By Kan, Iddo; Reznik, Ami; Kimhi, Ayal; Kaminski, Jonathan

  1. By: Kerim Peren Arin; Guglielmo Maria Caporale; Kyriacos Kyriacou; Nicola Spagnolo
    Abstract: This paper examines financial spillovers between the four largest equity markets (by market capitalization) in the GCC region using a VAR-GARCH (1,1) framework that sheds light on interdependence as well as the effects of the 2014 oil crisis. Since the UAE is a federation including two stock exchanges (Abu Dhabi and Dubai), it is possible to test whether being part of a federal union matters more than market size in terms of financial integration. Our results suggest that the latter is more important, since we could not find evidence of stronger linkages between the Abu Dhabi and Dubai markets compared to those between other markets in the region. By contrast, there are significant spillover effects, both in the mean and in the volatility, from the largest market of Saudi Arabia to Qatar and the two markets in the UAE, which confirms that market capitalization is a more important determinant of financial integration than belonging to a federal union. Further, spillovers from the larger markets have become stronger as a result of the 2014 oil crisis. Finally, there is also evidence of spillovers from the smaller to the larger markets.
    Keywords: stock markets, GCC, volatility transmission
    JEL: C32 F36 G15
    Date: 2019
  2. By: Hammami, Algia; Ghenimi, Ameni; Bouri, Abdelfatteh
    Abstract: This paper investigates the long-run and the short-run relationship between oil prices (international oil price), US exchange rates and the Amman Stock Exchange as measured by MSCI stock market index in Jordan. The data used in this paper are monthly time series data from M1 2005 to M12 2015. To meet this ambitious objective, we use VECM method. Our results show that the Jordan stock market prices have a relationship with two macroeconomic variables. Nevertheless, oil prices have significantly long and short-run negative effect on stock prices contrary to the US exchange rate that has a significant negative effect on stock prices only in the short term.
    Keywords: VECM, Crude Oil Price, US Exchange Rate, Jordan Stock Market
    JEL: G0
    Date: 2019–06–20
  3. By: International Monetary Fund
    Abstract: Context: Availability of buffers has enabled Qatar to successfully absorb the adverse shocks from the 2014–16 decline in oil prices and the 2017 diplomatic rift. The policy priorities are fiscal consolidation, strengthened fiscal policy frameworks, enhanced resiliency of the financial sector, financial inclusion, and a diversified economy. Outlook and risks: Stronger real GDP growth is envisaged in the near term, with a recovery in hydrocarbon output. Medium-term growth will be buoyed by increased gas production and non-hydrocarbon growth. Expenditure consolidation would help to sustain fiscal and external surpluses. Ample liquidity will enable credit growth to support non-hydrocarbon GDP. Trade and geopolitical tensions could undermine investor confidence and weaken fiscal and external positions. Qatar is well placed to contain the adverse macro-financial implications of downside risks in view of considerable buffers.
    Date: 2019–06–03
  4. By: International Monetary Fund
    Abstract: Selected Issues
    Date: 2019–06–03
  5. By: Kan, Iddo; Slater, Yehuda; Reznik, Ami; Finkelshtain, Israel
    Abstract: This paper incorporates the detrimental agronomic effects of irrigation-water salinity into an empirical economy-wide dynamic hydro-economic model to study the interactions between salinity, agricultural policies and optimal long-run water-allocation policies and water-infrastructure plans. Application to the case of Israel indicates economic viability of large-scale delivery of desalinated water for agricultural irrigation during a 30-year period (2016–2045). We explain this finding by the large share of salinity-sensitive crops in the total irrigation-water consumption and production value of the Israeli vegetative agriculture sector, which stems from the historical policy to protect local agriculture. On average, the annual damage caused by the presence of salts in Israel’s water sources is evaluated at nearly $4,500 per hectare of arable land, comprising deadweight loss in both the water and agricultural economies. Overlooking salinity’s agronomic effects in the design of water infrastructures entails an annual welfare loss of nearly $1,360/hectare, and income redistributions wherein the profits of water suppliers increase significantly at the expense of the economic surpluses of urban water users, farmers, and consumers of agricultural products.
    Keywords: Agricultural and Food Policy, Farm Management, Resource /Energy Economics and Policy
    Date: 2019
  6. By: Kimhi, Ayal; Siminovich, Ortal
    Abstract: We analyze the responses of dairy farmers in Israel to an institutional reform that allowed, for the first time, for buying and selling of production quotas, and provided financial incentives for such quota trading. Larger producers were less likely to sell quota and exit but also less likely to expand, indicating that the incentives were most effective for smaller farms who had to choose between exit and expansion. The existence of a successor reduced the exit probability, while farmers working off the farm were more likely to expand by buying additional quota.
    Keywords: Agricultural and Food Policy, Livestock Production/Industries
    Date: 2018
  7. By: Bar-Nahum, Ziv; Finkelshtain, Israel; Kan, Iddo
    Abstract: We integrate a differentiated goods oligopoly model with a political-economy model to assess the effectiveness of the partial price-ceiling policy in the Israeli fluid-milk market. We estimate minor political influence of the industry on regulators with respect to the price ceilings, and find markups in the regulated segment considerably lower than those in the unregulated one. Compared to a simulated unregulated industry, the prevailing partial price-ceiling regulation is found reducing market prices by 22% and markups by 78%, and increasing social welfare by 12%. The hypothesis of collusion in the unregulated segment is statistically rejected. We show that the combined estimates of political influence and demand substitution across products turn collusion in the laissez-faire segment an inferior strategy from the industry’s perspective.
    Keywords: Demand and Price Analysis, Livestock Production/Industries
    Date: 2018
  8. By: Kan, Iddo; Reznik, Ami; Kimhi, Ayal; Kaminski, Jonathan
    Abstract: This paper combines a structural estimation of vegetative-agriculture supply, based on a farmland-allocation model, with a market-level partial equilibrium demand model, to simulate the effects of climate change on agricultural production and food prices. The supply estimation accounts for corner solutions associated with disaggregate land-use data, enabling the treatment of prices as exogenous. The explicit formulation of production and output prices enables linkage to the demand, as well as the exploitation of market-level data so as to assign production interpretation to the estimated coefficients of the land-use model. We use the model to assess climate-change impacts in Israel, where agriculture is protected by import tariffs. We find that the projected climate changes are beneficial to farmers, particularly due to the positive impact of the forecasted large temperature rise on field-crop production. Fruit outputs are projected to decline, and reduce consumer surplus, but to a lower extent than the increase in total agricultural profits. Nearly 20% of the profit rise is attributed to farmers’ adaptation through land reallocation. Adaptation to the projected reduction in precipitation by increasing irrigation is found to be warranted from the farmers’ perspective; however, it is not beneficial to society as a whole. Abolishing import tariffs effectively transfers surpluses from producers to consumers, but the impact of this policy on social welfare becomes positive only under scenarios of large climate change.
    Keywords: Demand and Price Analysis, Environmental Economics and Policy, Production Economics
    Date: 2018

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