IMF Working Papers

Credit Constraints, Political Instability, and Capital Accumulation

By Risto Herrala, Rima A Turk

December 16, 2013

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Risto Herrala, and Rima A Turk. Credit Constraints, Political Instability, and Capital Accumulation, (USA: International Monetary Fund, 2013) accessed July 11, 2025
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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

Publication Details

  • Pages:

    26

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2013/246

  • Stock No:

    WPIEA2013246

  • ISBN:

    9781484303085

  • ISSN:

    1018-5941

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