The Journal of Environment & Development· 2026Q1
Unpacking the Drivers of Market Development in the Middle East: The Role of Growth, Price Stability, and Exchange Rate Efficiency
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- Q1SCImago
- 2026year
Short summary
Middle East market development from 2010-2024 is significantly driven by GDP growth, exchange-rate stability, and gradual liberalization, while high inflation hinders progress by distorting price signals.
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Key points
- GDP growth is a key, though diminishing, driver of market expansion in the Middle East.
- High inflation negatively impacts market development by distorting price signals and weakening long-term contracts.
- Exchange-rate stability and gradual liberalization enhance market efficiency and attract durable capital.
- Macroeconomic stability is essential for institutional capacity and sustainable financial development in the region.
AI-generated from the title and abstract; the full text is not read.
Abstract
This study analyzes how economic growth (GDP), inflation (INF), and exchange-rate dynamics influence market development in the Middle East during the reform-intensive period of 2010–2024. As the region shifts toward a more diversified, innovation-oriented economy, macroeconomic stability has become central to shaping institutional capacity and sustainable financial development. Drawing on demand-following theory and the finance-growth nexus, the paper employs VAR modeling and variance decomposition to evaluate short- and long-run interactions among the variables. Results show that GDP growth remains a key driver of market expansion, though its marginal impact declines as markets mature. Inflation strongly undermines development by distorting price signals and weakening long-term contracting. Exchange-rate stability and gradual liberalization enhance weak-form efficiency and attract more durable capital inflows. The findings underscore the importance of low inflation and calibrated exchange-rate reform for building resilient financial systems that support broader development objectives.
The authors' abstract, as published at the source. The Journal of Environment & Development, 2026 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance