Credit Constraints, Political Instability, and Capital Accumulation

December 16, 2013

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

Pages:
26
Volume:
2013
DOI:
https://doi.org/10.5089/9781484303085.001
Issue:
246
Series:
Working Paper No. 2013/246
Stock No:
WPIEA2013246
ISBN:
9781484303085
ISSN:
1018-5941

Loading component...

IMF’s Work

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

Loading component...

IMF Working Papers