Macroeconomic dynamics and interdependencies in the MENA region: An MS-VAR analysis

Abstract

In my paper, I examine the macroeconomic dynamics of MENA countries from 1980 to 2022. I utilize the Markov-Switching Vector Autoregressive (MS-VAR) model to analyze the behavior and economic interdependencies of these economies across different states. The results indicate a significant degree of dependence within the region, particularly among North African economies (Algeria, Tunisia, Morocco) and Gulf nations (Saudi Arabia, Bahrain, United Arab Emirates). Both static and dynamic analyses reveal that Saudi Arabia and Egypt are key players in regional economic fluctuations, influencing trade, investment, and the synchronization of business cycles. The findings also demonstrate high volatility in countries such as Iraq and Syria, reflecting instability, while others, like Bahrain and Jordan, exhibit more stable economic transitions. This study underscores the importance of economic integration and policy coordination in promoting regional stability and sustainable growth within the MENA region.