A disequilibrium evaluation of public intervention in agricultural credit markets

Todd Hubbs and Todd Kuethe ()

Agricultural Finance Review, 2017, vol. 77, issue 1, 37-49

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.

Keywords: Farm credit system; Agricultural credit; Disequilibrium (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-04-2016-0032

DOI: 10.1108/AFR-04-2016-0032

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