Assessing the determinants of banking stability in the MENA region: what role for economic and financial freedom?

The main objective of this paper is to investigate the effects of economic freedom and financial freedom on bank stability in 12 Middle-East and North Africa region countries during the period 2005–2020. Using an empirical approach based on the System Generalized Method of Moments, our results reveal that economic freedom, financial freedom, investment freedom and business freedom increase bank stability. A high degree of economic freedom promotes innovation and entrepreneurship and, hence, leads to economic growth and better banking stability. In contrary, we confirm that monetary freedom negatively affects bank stability. The same result was confirmed for the two sub-samples of Middle Eastern countries and North African countries. [ABSTRACT FROM AUTHOR]