Credit Conditions and Firm Investment: Evidence from the MENA Region

29 Pages Posted: 15 Dec 2012 Last revised: 31 Jan 2014

See all articles by Risto Herrala

Risto Herrala

European Central Bank (ECB) - Directorate General International and European Relations

Rima Turk-Ariss

International Monetary Fund; Economic Research Forum

Date Written: November 28, 2012

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.

Keywords: financing constraints, credit limits, MENA countries

JEL Classification: G31, L20, O16

Suggested Citation

Herrala, Risto and Turk-Ariss, Rima, Credit Conditions and Firm Investment: Evidence from the MENA Region (November 28, 2012). BOFIT Discussion Paper No. 29/2012. Available at SSRN: https://ssrn.com/abstract=2189455 or http://dx.doi.org/10.2139/ssrn.2189455

Risto Herrala (Contact Author)

European Central Bank (ECB) - Directorate General International and European Relations ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Rima Turk-Ariss

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Economic Research Forum ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt

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