Credit Conditions and Firm Investment: Evidence from the MENA Region
29 Pages Posted: 15 Dec 2012 Last revised: 31 Jan 2014
Date Written: November 28, 2012
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 Classification: G31, L20, O16
Suggested Citation: Suggested Citation