Does Institutional Quality Affect the Finance-poverty Nexus? Evidence from Arab Countries

(Pages 491-501)

Kaouthar Gazdar*
College of Islamic Economics and Finance- (Umm Al -Qura University- Saudi Arabia).
Faculty of Economic Sciences and Management of Sousse (University of Sousse, Tunisia).


This paper investigates whether the level of institutional quality affects the finance-poverty relationship in Arab countries. Panel cointegration tests and FMOLS method of estimation are conducted for a sample of 14 Arab countries over the period 1996-2021. Using an interaction term constructed as a product between financial development indicators and an institutional index, we find that there was a conditional relationship between financial development and poverty. Moreover, institutional quality mitigates the negative effect of financial development on poverty alleviation. Consequently, a threshold level of institutional quality was determined in this study. In fact, to benefit from financial development in terms of poverty reduction, Arab countries must achieve an institutional threshold level close to 1.8 and 0.6 when the domestic credit to private sector ratio and the number of bank accounts per 1,000 adults are considered as indicators of financial development respectively.


Financial development, institutional quality, poverty alleviation, Arab countries.

JEL Codes:

G20, I32, C23, O17.

How to Cite:

Kaouthar Gazdar. Does Institutional Quality Affect the Finance-poverty Nexus? Evidence from Arab Countries. [ref]: vol.21.2023. available at:

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