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A disequilibrium evaluation of public intervention in agricultural credit markets

Author

Listed:
  • Todd Hubbs
  • Todd Kuethe

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.

Suggested Citation

  • Todd Hubbs & Todd Kuethe, 2017. "A disequilibrium evaluation of public intervention in agricultural credit markets," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 77(1), pages 37-49, May.
    • Handle: RePEc:eme:afrpps:afr-04-2016-0032
    DOI: 10.1108/AFR-04-2016-0032
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    Citations

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    Cited by:

    1. Jennifer Ifft & Todd H. Kuethe & Gregory Lyons & Alexander Schultz & John Y. Zhu, 2024. "Crop insurance's impact on commercial bank loan volumes: Theory and evidence," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 46(1), pages 318-337, March.
    2. Baird, Matthew & Daugherty, Lindsay & Kumar, Krishna B., 2019. "Improving Estimation of Labor Market Disequilibrium Using Shortage Indicators, with an Application to the Market for Anesthesiologists," IZA Discussion Papers 12129, Institute of Labor Economics (IZA).
    3. Matthew Baird & Lindsay Daugherty & Krishna Kumar, 2017. "Improving Estimation of Labor Market Disequilibrium through Inclusion of Shortage Indicators," CINCH Working Paper Series 1701, Universitaet Duisburg-Essen, Competent in Competition and Health.
    4. Ifft, Jennifer E. & Kuhns, Ryan & Patrick, Kevin T., 2017. "Predicting Credit Demand with ARMS: A Machine Learning Approach," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258134, Agricultural and Applied Economics Association.
    5. Ty Kreitman & Todd Kuethe & David B. Oppedahl & Francisco Scott, 2022. "The Supply and Demand of Agricultural Loans," Research Working Paper RWP 22-06, Federal Reserve Bank of Kansas City.
    6. Chad Fiechter & Todd Kuethe & David B. Oppedahl, 2021. "Perceived Competition in Agricultural Lending: Stylized Facts and an Agenda for Future Research," Working Paper Series WP-2021-16, Federal Reserve Bank of Chicago.

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