Credit Constraints, Political Instability, and Capital Accumulation
December 16, 2013
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Summary
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.
Subject: Capital accumulation, Credit, Credit ceilings, Financial institutions, Financial services, Money, National accounts, Real interest rates, Stocks
Keywords: Capital accumulation, Central Asia, Credit, Credit ceilings, credit constraint, credit constraints, credit limit, debt amount, East Africa, enterprise development, equity capital, firm, firm Age, firm investment behavior, firm's fixed assets, MENA countries, Middle East, North Africa, political unrest, Real interest rates, Stocks, Sub-Saharan Africa, WP
Pages:
26
Volume:
2013
DOI:
Issue:
246
Series:
Working Paper No. 2013/246
Stock No:
WPIEA2013246
ISBN:
9781484303085
ISSN:
1018-5941
