A disequilibrium evaluation of public intervention in agricultural credit markets. Issue 1 (2nd May 2017)

• Record Type: Journal Article
• Authors: Hubbs, Todd; Kuethe, Todd
• Is Part Of: Agricultural finance review. Volume 77:Issue 1(2017)
• Page Start: 37
• Page End: 49
• Publication Date: 2017-05-02
• Subjects: Farm credit system -- Agricultural credit -- Disequilibrium; Agriculture -- Finance -- Periodicals; Agriculture -- Finance -- Statistics -- Periodicals; Agricultural insurance -- Periodicals; Agriculture -- Taxation -- Periodicals; 332.71
• DOI: 10.1108/AFR-04-2016-0032
• Languages: English
• ISSNs: 0002-1466

Abstract

Abstract : Purpose: Agricultural producers rely on debt capital to support many functions of their enterprise, yet private credit markets are frequently characterized by an imbalance between supply and demand. As a result, a number of public lending programs exist to mitigate the perceived market failures of private credit markets that serve agricultural producers. The paper aims to discuss these issues. Design/methodology/approach: This study uses a structural disequilibrium model to examine the potential for excess demand or supply in the private market for non-real estate farm loans between 1978 and 2014. Findings: The model demonstrates that the market is frequently characterized by disequilibrium, fluctuating between periods of excess demand and excess supply. These disequilibrium periods motivate the discussion of public intervention as a policy proposal within the agricultural sector. Originality/value: This study uses traditional disequilibrium modeling to evaluate the private credit market for agriculture lending in a manner that has not been attempted previously in the literature. The model uses maximum likelihood methods with non-linear solution algorithms to investigate excess supply and demand in the sector.