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Theoretical-empirical analysis of the role of the SGAFF in financing of farmers' activities

Author

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  • L. Čechura

    (Department of Agricultural Economics, Faculty of Economics and Management, Czech University of Life Sciences, Prague, Czech Republic)

Abstract

The paper deals with the theoretical-empirical analysis of the role of the SGAFF in financing of farmers' activities based on the dynamic optimal model and time series analysis. The dynamic optimization problem is solved by the Lagrange method. The application of the theoretical model shows that the lower is the interest rate paid by the farmer, the lower is the optimal consumption and consequently the farmer is willing to employ a higher part of the capital in the production. Thus, the initial capital is more effectively employed. The empirical part shows that the SGAFF's activities significantly support the farmers' investments. In spite of the problems in the setting of the SGAFF's policy, the role of the SGAFF in financing of agricultural activities can be regarded as positive in the analyzed period. Moreover, the application of the theoretical model and the empirical analysis suggest that the SGAFF contributes to a more effective capital employment and thereby increases the competitiveness of Czech agriculture in the long run.

Suggested Citation

  • L. Čechura, 2008. "Theoretical-empirical analysis of the role of the SGAFF in financing of farmers' activities," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 54(10), pages 476-488.
    • Handle: RePEc:caa:jnlage:v:54:y:2008:i:10:id:274-agricecon
    DOI: 10.17221/274-AGRICECON
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    References listed on IDEAS

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    1. Chow, Gregory C., 1997. "Dynamic Economics: Optimization by the Lagrange Method," OUP Catalogue, Oxford University Press, number 9780195101928.
    2. L. Čechura, 2006. "The role of credit rationing in Czech agriculture - the case of large agricultural enterprises," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 52(10), pages 477-488.
    3. Karel Janda, 2003. "Credit guarantees in a credit market with adverse selection," Prague Economic Papers, Prague University of Economics and Business, vol. 2003(4), pages 331-349.
    4. Čechu­ra, Lukas, 2008. "Investment, credit constraints and public policy in a neoclassical adjustment cost framework [Investitionen, Kreditrationierung und Agrarpolitik in einem dynamischen neoklassischen Modell mit Anpassungskosten]," IAMO Discussion Papers 115, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    5. Karel Janda & Martin Čajka, 2006. "Státní podpora českého zemědělského úvěru v období před vstupem do Evropské unie / Government Support of the Czech Agricultural Credit in the Period Before the Accession to the European Union [available in Czech only]," Working Papers IES 2006/15, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised May 2006.
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