Economic Complexity, Energy Prices, and Growth in the MENA Region

Abstract

This study examines the interactive effects of economic complexity and energy price fluctuations on economic growth in 17 Middle East and North Africa (MENA) countries during the period 1990–2024. While previous studies have largely investigated the separate effects of economic complexity and energy dynamics on growth, limited attention has been given to how productive sophistication can influence the transmission of energy price shocks. To address this gap, this study develops an integrated empirical framework in which economic complexity is introduced as a moderating factor in the energy price–growth relationship. Using an unbalanced panel dataset, the analysis applies Method of Moments Quantile Regression (MMQR) to capture heterogeneous effects across different levels of economic performance and employs Cross-Sectionally Augmented ARDL (CS-ARDL) as a robustness approach. The findings reveal that the impact of economic complexity on growth is nonlinear and depends on countries’ development conditions. Specifically, economic complexity reduces growth at lower quantiles, reflecting the short-term costs of structural transformation, but contributes positively to growth among high-performing economies with greater absorptive capacity. Energy price increases generally exert a negative effect on economic growth, particularly in lower-growth economies. However, the interaction between economic complexity and energy prices is positive and significant, indicating that higher economic complexity mitigates the adverse consequences of energy price fluctuations. The results highlight that economic complexity is not only a driver of long-term growth but also an important resilience mechanism against external energy shocks. These findings provide valuable policy implications for MENA countries seeking economic diversification, energy security, and sustainable growth.