Stock market development 477 Managerial Finance Vol. 33 No. 7, 2007 pp. 477-489 # Emerald Group Publishing Limited 0307-4358 DOI 10.1108/03074350710753753 The determinants of stock market development in the Middle-Eastern and North African region Samy Ben Naceur Faculty of Economics and Business, Universite ´ Libre de Tunis, Tunis, Tunisia Samir Ghazouani Institut Supe ´rieur de Comptabilite ´ & d’Administration des Entreprises (ISCAE), Campus Universitaire de Manouba, Manouba, Tunisia, and Mohamed Omran College of Management and Technology, Arab Academy of Science and Technology, Alexandria, Egypt Abstract Purpose – The purpose of this study is to investigate the role of stock markets in economic growth and to shed some light on the macroeconomic determinants which must have an important influence on stock markets development. Design/methodology/approach – The empirical study is conducted using an unbalanced panel data from 12 Middle Eastern and North African (MENA) region countries. Econometric issues are based on estimation of some fixed and random effects specifications. Findings – It is found that saving rate, financial intermediary, stock market liquidity and the stabilization variable are the important determinants of stock market development. In addition, it is found that financial intermediaries and stock markets are complements rather than substitutes in the growth process. Practical implications – This paper has some policy implications to MENA region countries. In order to promote stock market development in the region, it is important to encourage savings by appropriate incentives, to improve stock market liquidity, to develop financial intermediaries and to control inflation. Originality/value – Since it is unclear whether emerging markets in the MENA region respond, similarly, to economic and political shocks like other emerging markets and/or developed markets. This paper fills this gap by making an in-depth analysis of 12 MENA capital markets in order to assess how they can improve their capital markets, and hence, benefit the global investor. Keywords Stock markets, Capital markets, Middle East, North Africa Paper type Research paper 1. Introduction Even though most Middle-Eastern and North African (MENA) countries have embarked on economic reform and structural adjustment programs, the Asian crisis of 1997 shifted the focus of such programs to financial markets. However, the lack of institutional development is a powerful obstacle to an increased access to MENA capital markets. Additionally, the region witnessed, and still, wars, political turmoil and economic instability. Consequently, MENA countries have not yet emerged as economic powers, which might explain the lack of academic research on MENA capital markets. In fact, it is unclear whether emerging markets in the MENA region respond, The current issue and full text archive of this journal is available at www.emeraldinsight.com/0307-4358.htm