Credit guarantees in a credit market with adverse selection

Karel Janda

Prague Economic Papers, 2003, vol. 2003, issue 4, 331-349

Abstract: This paper deals with government interventions in agricultural credit markets in the Czech Republic. I first describe the institutional setting and the empirics of agricultural credit in the Czech Republic. I explain the activities of the Czech Agricultural Guarantee Fund and compare it with similar institutions dealing with the support of agricultural credit in transition and developed market economies. Then I introduce an adverse selection model of credit provision with proportional credit guarantees. The model distinguishes two market regimes - a developed post-transition market economy and a transition economy. This distinction between transition and post-transition economies leads to different results generated by credit markets. Most notably, there is a failure of collateral as a screening instrument in credit markets of transition economies. With economic stabilization collateral resumes its role as a screening instrument.

Keywords: government intervention; adverse selection; agricultural credit (search for similar items in EconPapers)
JEL-codes: D82 G38 P34 Q14 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (25)

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DOI: 10.18267/j.pep.225

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