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Credit conditions and firm investment: Evidence from the MENA region

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  • Herrala, Risto
  • Turk-Ariss, Rima

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.

Suggested Citation

  • 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 Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2012_029
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    More about this item

    Keywords

    financing constraints; credit limits; MENA countries;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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