Credit conditions and firm investment : Evidence from the MENA region

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Title: Credit conditions and firm investment : Evidence from the MENA region
Author: Herrala, Risto ; Turk-Ariss, Rima
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 29/2012
Year of publication: 2012
Publication date: 1.12.2012
Published in: Published in Journal of International Money and Finance, Volume 64, June 2016, Pages 1–15 as "Capital accumulation in a politically unstable region"
DOI: 10.1016/j.jimonfin.2016.01.008
Pages: 29 s.
Keywords: luotot; yritykset; investoinnit; rahoitus; pääoma; mallit; Arabimaat; Bofit-kokoelma; MENA; lähi-itä
JEL: G31; L20; O16
Abstract: The Arab Spring is a clear indicator of the urgency of achieving inclusive growth and ensuring job creation in the Middle East and North Africa (MENA) region, where private sector development is still hindered by limited access to credit. Following Kiyotaki and Moore's (1997) seminal model, we apply a novel methodological approach to a unique data set of MENA firms to estimate credit limits and their impacts on capital accumulation. Notably, we find higher credit limits in countries where the Arab Spring erupted than in other MENA countries and that their marginal effect on capital accumulation has been statistically and economically significant. Keywords: financing constraints, credit limits, MENA countries JEL: G31, L20, O16

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