Gatti, RobertaLove, Inessa2012-03-302012-03-302008Economics of Transition09670750https://hdl.handle.net/10986/5764Although it is widely accepted that financial development is associated with higher growth, the evidence on the channels through which credit affects growth at the microeconomic level is scant. Using data from a cross-section of Bulgarian firms, we estimate the impact of access to credit, as proxied by indicators of whether firms have access to a credit line or overdraft facility, on productivity. To overcome potential omitted variable bias of Ordinary Least Squares (OLS) estimates, we use information on firms' past growth to instrument for access to credit. We find credit to be positively and strongly associated with TFP. These results are robust to a wide range of robustness checks.ENProductionCostCapital, Total Factor, and Multifactor ProductivityCapacity D240Capital BudgetingFixed Investment and Inventory Studies G310Financing PolicyFinancial Risk and Risk ManagementCapital and Ownership Structure G320Socialist Enterprises and Their Transitions P310Socialist Institutions and Their Transitions: Financial Economics P340Journal ArticleWorld Bank