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Credit conditions and firm investment: Evidence from the MENA region

  • Herrala, Risto

    ()

    (BOFIT)

  • Turk Ariss, Rima

    ()

    (BOFIT)

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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File URL: http://www.suomenpankki.fi/bofit/tutkimus/tutkimusjulkaisut/dp/Documents/2012/dp2912.pdf
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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
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
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  1. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  2. 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.
  3. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  4. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
  5. Poncet, Sandra & Steingress, Walter & Vandenbussche, Hylke, 2010. "Financial constraints in China: Firm-level evidence," China Economic Review, Elsevier, vol. 21(3), pages 411-422, September.
  6. 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.
  7. Asim Ijaz Khwaja & Atif Mian, 2008. "Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market," American Economic Review, American Economic Association, vol. 98(4), pages 1413-42, September.
  8. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  9. 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.
  10. 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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