Volume 5, Issue 2

The Kuwaiti consumption function is examined for the 1973-2003 time period. The dramatic events included: the Arab oil embargo of 1973, Kuwait's nationalization of oil facilities in 1976, the oil price shock in 1978, the Iranian Revolution in 1979, the Iran/Iraq war, Kuwait's unofficial stock market Al Manakh crash, increases in crude oil supply by non-OPEC producers by ten million barrels per day, the collapse of world crude oil prices in 1986, and the 1990 Iraq invasion. This paper examines three decades in which Kuwait experiences a variety of uncommonly dramatic economic and sociological events. The question we are addressing econometrically is: "Is consistency in Kuwaiti consumption maintained even in the presence of extreme economic conditions?"We found that Kuwaiti consumption is consistent with the Permanent Income Hypothesis. That is the marginal propensity to consume (MPC) approaches the average propensity to consume (APC) and the intercept is not significantly different from zero. Moreover, this result of a relatively small MPC of 0.30 is consistent with the contentions of Keynes and Kurihara that wealthy high income economies have relatively small values for MPC and APC.

Despite the EU emphasis on the 1995 Barcelona process, trade integration with the Mediterranean (MED) countries is still underdeveloped. To contrast the success of EU integration with MED countries and that with the new EU members, we compute the trade potential of these EU partners from 1995 to 2002 using an "out-of-sample" methodology. The coefficients are taken from different panel estimators of the gravity equation relative to intra-EU trade. Our analysis suggests the existence of sizeable, unexploited trade potential with both groups of partners, although the ratio of potential to actual trade with the MED countries is much larger (from 1.7 to 2.5 times), more dispersed and stable compared to that with the CEECs.

In this paper, we document the main factors underlying foreign portfolio inflows to Gulf Corporation Council countries (hereafter GCC). We find that bilateral factors, in particular, export volumes from GCC (host) countries to source countries, play a truly significant role in determining the volume of cross border portfolio inflows to GCC markets. This connection becomes even stronger over time. Moreover, GCC members' stable fiscal position is practically one of the important determinants of the volume of portfolio inflows to GCC markets. We have also found that the extent of openness in capital account transactions and the income levels of source countries are additional factors that can help explain the volume of foreign portfolio inflows to GCC members. Last but not least there exists to some extent a "GCC bias;" a large share of the portfolio inflows to GCC markets comes from other GCC countries.

We have compared the efficiency of banks with majority domestic ownership, banks with majority foreign ownership, and the subsidiaries of foreign banks operating in the Lebanese market between 1996 and 2005. We have implemented the DEA methodology to calculate the yearly scores for technical, allocative, and cost efficiencies for the three groups of banks. Moreover, we have extended our study to reveal the factors that shape bank efficiency, by proposing several micro and macroeconomic variables and testing their correlation with this efficiency.Firstly, our results did not prove significant differences between the efficiency of the three groups of banks. However, the evolution of the efficiency scores over the period under study shows an improvement in the performance of banks with majority foreign ownership, but some deterioration in the performance of banks with majority domestic ownership and the subsidiaries of foreign banks.Secondly, and with respect to the factors affecting bank efficiency, we found that the employed variables have different impacts according to groups, which may confirm that bank efficiency is differently determined, according to bank ownership.

This paper aims to investigate empirically the effect of financial restraints on financial development in Iran over the period 1960–2005 by using the conditional co-integration method. In doing so, different hypotheses in terms of financial restraints and financial development in the context of the McKinnon/Shaw model and the monopoly bank model are addressed. The main results show that financial restraints had a negative effect on financial development. The finding indicates that monetary authorities in Iran used a severe financial repression policy because a mild repressive policy in a monopoly banking structure which is the case in Iran could have increased financial intermediation.