McKinnon’s Complementarity Hypothesis: Empirical Evidence for the Arab Maghrebean Countries

This study aims to verify the financial repression theory’s assumptions for the Arabic Maghrebean countries during a time period ranging from 1973 to 2003. First, the interest rates in the Arab Maghrebean countries were regulated. Moreover, the low and administered interest rate discourages savings, retards the efficient allocation resources, increases the segmentation of financial markets, constrains investment and in term lowers the economic growth rate. This paper is to provide empirical evidence concerning neoliberal hypothesis for Tunisia, Algeria and Morocco. The money demand and investment function are estimated in static long-run formulations (cointegration regression) as well as in the dynamic formulation (VECM).