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Credit conditions and firm investment: Evidence from the MENA region

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Author Info

  • Herrala, Risto

    ()
    (BOFIT)

  • Turk Ariss, Rima

    ()
    (BOFIT)

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.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 29/2012.

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Length: 29 pages
Date of creation: 28 Nov 2012
Date of revision:
Handle: RePEc:hhs:bofitp:2012_029

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Keywords: financing constraints; credit limits; MENA countries;

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References

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  1. Herrala, Risto & Turk Ariss, Rima, 2012. "Credit conditions and firm investment: Evidence from the MENA region," BOFIT Discussion Papers 29/2012, Bank of Finland, Institute for Economies in Transition.
  2. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  3. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  4. Stein, Jeremy C., 2003. "Agency, information and corporate investment," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 2, pages 111-165 Elsevier.
  5. Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
  6. Atif Mian & Asim Ijaz Khwaja, 2006. "Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market," NBER Working Papers 12612, National Bureau of Economic Research, Inc.
  7. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  8. PONCET, Sandra & STEINGRESS, Walter & VANDENBUSSCHE, Hylke, . "Financial constraints in China: firm-level evidence," CORE Discussion Papers RP -2350, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Roberto R. Rocha & Zsofia Arvai & Subika Farazi, 2011. "Financial Access and Stability : A Road Map for the Middle East and North Africa," World Bank Publications, The World Bank, number 2360, October.
  10. Bhaumik, Sumon Kumar & Das, Pranab Kumar & Kumbhakar, Subal C., 2012. "A stochastic frontier approach to modelling financial constraints in firms: An application to India," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1311-1319.
  11. Roberto Rocha, 2011. "Financial Access and Stability : A Road Map for the Middle East and North Africa," World Bank Other Operational Studies 10868, The World Bank.
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Cited by:
  1. Herrala, Risto, 2014. "Forward-looking reaction to bank regulation," Working Paper Series 1645, European Central Bank.
  2. Herrala, Risto & Turk Ariss, Rima, 2012. "Credit conditions and firm investment: Evidence from the MENA region," BOFIT Discussion Papers 29/2012, Bank of Finland, Institute for Economies in Transition.

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