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Do Credit Constraints Affect SME Investment and Employment?


  • Petra Gerlach-Kristen

    (Swiss National Bank, Zurich, Switzerland)

  • Brian O'Connell

    (Indecon International Economic Consultants, Dublin)

  • Conor O'Toole

    (Central Bank of Ireland)


This paper explores the potential presence of credit constraints confronting Irish SMEs and investigates the impact of these constraints on firms’ employment and investment. Using new survey data collected by the Department of Finance, we define firms as credit rationed or discouraged borrowers and link these constraints to employment and the propensity to invest. We find a negative and significant effect of SME credit constraints on employment for firms that are discouraged from applying for credit. We also find a negative effect of constraints on the probability of an SME investing. This effect is driven by firms who are credit rationed when seeking capacity expansion loans.

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  • Petra Gerlach-Kristen & Brian O'Connell & Conor O'Toole, 2015. "Do Credit Constraints Affect SME Investment and Employment?," The Economic and Social Review, Economic and Social Studies, vol. 46(1), pages 51-86.
  • Handle: RePEc:eso:journl:v:46:y:2015:i:1:p:51-86

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    References listed on IDEAS

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    Cited by:

    1. Carroll, James & Mooney, Paul & O'Toole, Conor, 2016. "Irish SME Investment in Economic Recovery," Quarterly Bulletin Articles, Central Bank of Ireland, pages 77-91, March.
    2. O’Toole, Conor & Hennessy, Thia, 2015. "Do decoupled payments affect investment financing constraints? Evidence from Irish agriculture," Food Policy, Elsevier, vol. 56(C), pages 67-75.

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    credit; SMEs; investment; employment; Ireland;


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