publication . Article . Preprint . 2013

Credit Constraints, Political Instability, and Capital Accumulation

Rima Turk Ariss; Risto Herrala;
Open Access
  • Published: 16 Dec 2013 Journal: IMF Working Papers, volume 13, page 1 (issn: 1018-5941, Copyright policy)
  • Publisher: International Monetary Fund (IMF)
We investigate the complex interactions between credit constraints, political instability, and capital accumulation using a novel approach based on Kiyotaki and Moore’s (1997) theoretical framework. Drawing on a unique firm-level data set from Middle-East and North Africa (MENA), empirical findings point to a large and significant effect of credit conditions on capital accumulation and suggest that continued political unrest worsens credit constraints. The results support the view that financial development measured by a relaxing of financial constraints is key to macroeconomic development.
free text keywords: Egypt;Credit ceilings;Djibouti;Capital accumulation;Algeria;Bahrain;Kuwait;Jordan;Lebanon;Libyan Arab Jamahiriya;Iran, Islamic Republic of;Iraq;Middle East;Morocco;North Africa;Saudi Arabia;Qatar;Oman;United Arab Emirates;Transition economies;Tunisia;Syrian Arab Republic;West Bank and Gaza;Yemen, Republic of;credit constraints, political unrest, MENA countries, equity capital, real interest rate, equity ratio, capital goods, General,, Equity ratio, Monetary economics, Real interest rate, Unrest, Economics, Politics, Capital accumulation, Middle East, Syrian Arab Republic, Capital good
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