International financial integration of Mediterranean economies : A bird’s-eye view

In light of the unprecedented developments in the financial sectors of developed economies in the years 2008-2009 and in view of the current political Arab upheaval, this paper reviews the pros and cons of financial integration of the South-Mediterranean region. Our analyses includes Morocco, Algeria, Tunisia, Libya, Egypt, Palestine, Jordan, Lebanon and Syria. It focuses on financial integration indicators, as well as financial stability, and compares the South-Mediterranean region with other regions worldwide

Money Management and Mechanism in Palestinian Economy in Multi-Currencies Context

The Palestinian economy has no national currency, which has resulted in the circulation of three currencies (JD, US$, NIS) for deposits, saving, wealth measurement and trade transactions. This leads to challenges for the management of banking treasury activities in the Palestinian economy. This research examined how clients move from one currency to another in cases of saving and business transactions.&nbsp

The impact of exchange rate volatility on trade integration among North and South Mediterranean countries

The volatility of exchange rates leads to a reduction of international trade volumes, especially in emerging economies including the South Mediterranean countries. This study discusses the impact of exchange rates on bilateral South- North trade flows, which comes timely after the increased volatility between the Euro and Arab national currencies during the last few years and after the global financial crisis of 2008 that led to a sharp reduction at that time. We investigate the impact of exchange rate volatility on trade using monthly time series for the last ten years from 2000 up to 2011. By means of a Vector Auto Regression model with eXogenous variables (VARX) we estimate the reactions of bilateral exports and imports in response to exchange rate fluctuations between South and North Mediterranean economies. A sample of three South Arab countries is selected including Egypt, Jordan, and Morocco. Causality tests are conducted to examine the hypotheses. Our results show that the exports of goods from Egypt to the European Union decreases in comparison with the baseline by about 3% in case of an appreciation of 10% of the Egyptian pound vis-à-vis the euro, while the imports of Egypt from the EU increase by almost 10%. Also for Morocco, the imports from the EU react much stronger than the exports to the EU to a similar size appreciation of the Moroccan dirham. Jordan is less import-dependent, though reacts strongly in terms of exports if its dollar-pegged currency appreciates vis-à-vis the euro. Finally, we can conclude that the actual exchange rate changes are quite high

The impact of exchange rate volatility on trade integration among North and South Mediterranean countries

The volatility of exchange rates leads to a reduction of international trade volumes, especially in emerging economies including the South Mediterranean countries. This study discusses the impact of exchange rates on bilateral South- North trade flows, which comes timely after the increased volatility between the Euro and Arab national currencies during the last few years and after the global financial crisis of 2008 that led to a sharp reduction at that time. We investigate the impact of exchange rate volatility on trade using monthly time series for the last ten years from 2000 up to 2011. By means of a Vector Auto Regression model with eXogenous variables (VARX) we estimate the reactions of bilateral exports and imports in response to exchange rate fluctuations between South and North Mediterranean economies. A sample of three South Arab countries is selected including Egypt, Jordan, and Morocco. Causality tests are conducted to examine the hypotheses. Our results show that the exports of goods from Egypt to the European Union decreases in comparison with the baseline by about 3% in case of an appreciation of 10% of the Egyptian pound vis-à-vis the euro, while the imports of Egypt from the EU increase by almost 10%. Also for Morocco, the imports from the EU react much stronger than the exports to the EU to a similar size appreciation of the Moroccan dirham. Jordan is less import-dependent, though reacts strongly in terms of exports if its dollar-pegged currency appreciates vis-à-vis the euro. Finally, we can conclude that the actual exchange rate changes are quite high

International Financial Integration of South-Mediterranean Economies: A bird's-eye view

Should South-Mediterranean economies continue their financial integration in the world economy, considering their current stance and in view of the experiences of developed economies with the global financial crisis? The economies of the North-African rim, that is Morocco, Algeria, Tunisia, Libya and Egypt have become more exposed to the global economy during the decades 1990s and 2000s. The same holds to some extent for the Middle Eastern economies Palestine and Syria, while Jordan and Lebanon have become very open economies. In light of the unprecedented developments in the financial sectors of developed economies in the years 2008-2009 and in view of the current political Arab upheaval, this paper reviews the pros and cons of financial integration. It analyses financial integration indicators, as well as financial stability, and compares the South-Mediterranean region with other regions worldwide. In the global perspective of other regions worldwide, this group of South-Mediterranean economies is unique. From this study follows that most countries of this group have high cross-border bank assets in combination with limited bank liabilities, high inflows of FDI and remittances and relatively high outflows of remittances. Apart from their low degree of cross-border bank indebtedness, they are more financially integrated in the world economy in comparison with Asia, the CIS, Latin-America and the Sub-Sahara. The relatively low degree of trade and financial integration in the region and world economy sheltered these economies to a large extent from the negative external shocks during the global financial crisis of 2008-09. At the same time, the South-Mediterranean region has foregone the economic dividend that developed regions worldwide reaped thanks to growing financial sectors. At the moment of the writing of this paper, that is 2012, so after the global crisis and after or during the upheavals or revolutions in some countries, these South-Mediterranean economies are at a crossroad. This paper studies the status quo, the achievements of the last years and sheds light on the pros and cons of further financial integration, regionally or worldwide