The Capital Markets of the Middle East and North Africa (MENA) Region: Situation and Characteristics

TLDR: In this paper, the authors compared market emergence in the Middle and East and North African (MENA) region with other emerging markets, and found that market size and activity seem to affect market emergence, whereas pricing and transparency do not.

Abstract: This paper compares market emergence in the Middle and East and North African (MENA) region with other emerging markets. We first consider the main components of market emergence, including the size, depth, activity, and transparency of the market, and proceed to a descriptive analysis. Aggregating these observations into four bootstrapped indexes, we analyze the factors leading to market emergence with a probit model. We find that market size and activity seem to affect market emergence, whereas pricing and transparency do not. Finally, decomposing country-level probabilities and implementing a cluster analysis suggest that the average process of market emergence is more pronounced in the MENA region than it is in other emerging areas, such as Latin America and Eastern Europe. Overall, the results suggest that the MENA capital markets may attract more capital flows in the future. However, the markets are still heterogeneous: Whereas Turkey, Israel, Jordan, and Egypt are moving closer to the standards of developed countries, Lebanon, Tunisia, and Morocco can still be viewed as frontier markets.