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Stochastic Dynamic Modeling: An Aid To Agricultural Lender Decision Making

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  • Gustafson, Cole R.

Abstract

Factors affecting a lender's decision to grant farmers operating credit in North Dakota are quantified in an intertemporal loan profitability model using stochastic dynamic programming. Experimental data obtained from a panel of lenders demonstrates the sensitivity of an optimal policy to changes in a lender's discount rate, a borrower's repayment status, and patronage. The value of credit scoring models that appraise a borrower's credit worthiness also is determined.

Suggested Citation

  • Gustafson, Cole R., 1989. "Stochastic Dynamic Modeling: An Aid To Agricultural Lender Decision Making," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(01), pages 1-9, July.
    • Handle: RePEc:ags:wjagec:32463
    DOI: 10.22004/ag.econ.32463
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    References listed on IDEAS

    as
    1. Saxowsky, David M. & Gustafson, Cole R. & Ali, Mir B. & Braaten, Joan M. & Rotering, Jeff, 1987. "Economic Impact of North Dakota Laws that Permit Delayed or Partial Repayment of Agricultural Debt - July 1, 1986," Agricultural Economics Reports 23462, North Dakota State University, Department of Agribusiness and Applied Economics.
    2. Gustafson, Cole R. & Barry, Peter J. & Sonka, Steven T., 1988. "Machinery Investment Decisions: A Simulated Analysis For Cash Grain Farms," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(2), pages 1-10, December.
    3. Arrow, Kenneth J, 1982. "Risk Perception in Psychology and Economics," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 1-9, January.
    4. C. Robert Taylor & Oscar R. Burt, 1984. "Near-Optimal Management Strategies for Controlling Wild Oats in Spring Wheat," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(1), pages 50-60.
    5. Leistritz, F. Larry & Hardie, Wallace C. & Ekstrom, Brenda L. & Leholm, Arlen G. & Vreugdenhil, Harvey G., 1987. "Financial, Managerial, and Attitudinal Characteristics of North Dakota Farm Families: Results of the 1986 Farm Survey," Agricultural Economics Reports 23205, North Dakota State University, Department of Agribusiness and Applied Economics.
    6. Simon, Herbert A., 1984. "On the behavioral and rational foundations of economic dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 5(1), pages 35-55, March.
    7. Harold Bierman, Jr. & Warren H. Hausman, 1970. "The Credit Granting Decision," Management Science, INFORMS, vol. 16(8), pages 519-532, April.
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    Cited by:

    1. Otima, Ruth M. A., 1994. "Predicting loan repayment performance: a case of Kenyan farm borrowers," ISU General Staff Papers 1994010108000018175, Iowa State University, Department of Economics.
    2. Mjelde, James W. & Harris, Wesley D. & Conner, J. Richard & Schnitkey, Gary D. & Glover, Michael K. & Garoian, Lee, 1992. "Existence Of Unique Limiting Probability Vectors In Stochastic Processes With Multiple Transition Matrices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(2), pages 1-11, December.

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