Financial Integration Before and During the Financial Crisis of 2008: Evidence from GCC and MENA Stock Market
International Review of Business Research Papers
Vol. 12. No. 1. , March 2016, Pages: 43 – 63Financial Integration Before and During the Financial Crisis of 2008: Evidence from GCC and MENA Stock Market
This study investigates the impact of 2008 financial crisis on the links within two regions, the GCC markets (Bahrain, Kuwait, Oman, Qatar and United Arab of Emirates) and the MENA markets (Egypt, Jordan, Morocco, Tunisia and Turkey). The study main objective is to capture possible time-variant stock market integration in GCC markets and in MENA countries before and during the crisis 2008 using daily stock market indexes retrieved from MSCI over the period 1st June 2005 to 1st July 2010. The study uses Johansen cointegration theory (1988) to test the existence of long-term relationships within the GCC stock markets and within the MENA stock markets. The Cointegration results suggest that the GCC stock markets and the MENA stock markets are more integrated during the crisis period than prior to it. Further, the vector error correction model (VECM) of Engle and Granger (1987) results suggest that linkages among GCC and among MENA stock markets are also larger during the crisis period than prior to it. These results may require further study, but so far they show that the 2008 financial crisis form a common stochastic trend in both the MENA and the GCC stock markets.JEL Codes: F36, G15