IDEAS home Printed from https://ideas.repec.org/a/eee/jfpoli/v24y1999i1p21-47.html
   My bibliography  Save this article

Agricultural credit problems and policies during the transition to a market economy in Central and Eastern Europe

Author

Listed:
  • Swinnen, Johan F. M.
  • Gow, Hamish R.

Abstract

This paper assesses the problems of financing Central and Eastern European agriculture during the present transitionary period and what the role of government is in this process. Initially the paper looks at why credit markets work imperfectly, even in well developed market economies, focusing on the problems related to asymmetric information, adverse selection, moral hazard, credit rationing, the choice of optimal debt instrument and why initial wealth matters. It shows why these and related problems may cause transaction costs to high enough so that credit rationing and high interest rates are rational and efficient responses by lenders to the imperfect information problems of the agricultural sector. Then a series of specific, transition-related issues are discussed which have worsened these problems within the Central and Eastern European agricultural sector. This leads to a discussion of the potential roles for governments in solving these issues, specifically the use of credit subsidies, loan guarantees and specialised agricultural lending institutions. Finally, the paper reviews the actual government intervention which have occurred within the Central and Eastern European countries.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Swinnen, Johan F. M. & Gow, Hamish R., 1999. "Agricultural credit problems and policies during the transition to a market economy in Central and Eastern Europe," Food Policy, Elsevier, vol. 24(1), pages 21-47, February.
  • Handle: RePEc:eee:jfpoli:v:24:y:1999:i:1:p:21-47
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306-9192(98)00067-0
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gelb, Alan H., 1989. "Financial policies, growth, and efficiency," Policy Research Working Paper Series 202, The World Bank.
    2. Oliver Hart & John Moore, 1994. "A Theory of Debt Based on the Inalienability of Human Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 841-879.
    3. David de Meza & David C. Webb, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 281-292.
    4. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    5. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    6. J. D. Von Pischke & Dale W Adams, 1980. "Fungibility and the Design and Evaluation of Agricultural Credit Projects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(4), pages 719-726.
    7. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, December.
    8. Dowd, Kevin, 1992. "Optimal Financial Contracts," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 672-693, October.
    9. Gow, Hamish R & Swinnen, Johan F M, 1998. "Up- and Downstream Restructuring, Foreign Direct Investment, and Hold-Up Problems in Agricultural Transition," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(3), pages 331-350.
    10. Chang, Chun, 1990. "The dynamic structure of optimal debt contracts," Journal of Economic Theory, Elsevier, vol. 52(1), pages 68-86, October.
    11. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
    12. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    13. Joseph E. Stiglitz, 1981. "Information and Capital Markets," NBER Working Papers 0678, National Bureau of Economic Research, Inc.
    14. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    15. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    16. Petranov, Stefan & Roussinov, Kiril, 1993. "Credit for agriculture during the transition," MPRA Paper 105427, University Library of Munich, Germany.
    17. Tybout, James R, 1984. "Interest Control and Credit Allocation in Developing Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 474-487, November.
    18. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-855, September.
    19. Tybout, James R, 1983. "Credit Rationing and Investment Behavior in a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 598-607, November.
    20. Berger, Allen N. & Udell, Gregory F., 1990. "Collateral, loan quality and bank risk," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 21-42, January.
    21. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    22. Bester, Helmut, 1987. "The role of collateral in credit markets with imperfect information," European Economic Review, Elsevier, vol. 31(4), pages 887-899, June.
    23. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    24. Stiglitz, Joseph E, 1988. "Why Financial Structure Matters," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 121-126, Fall.
    25. Fafchamps, Marcel, 1997. "Trade credit in Zimbabwean manufacturing," World Development, Elsevier, vol. 25(5), pages 795-815, May.
    26. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    27. Pederson, Glenn D. & Khitarishvili, Tamar, 1997. "Challenges Of Agricultural And Rural Finance In Cee, Nis And Baltic Countries," Working Papers 14358, University of Minnesota, Center for International Food and Agricultural Policy.
    28. Bruce C. Greenwald & Joseph E. Stiglitz, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 229-264.
    29. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    30. Blejer, Mario I. & Sagari, Silvia B., 1991. "Hungary : financial sector reform in a socialist economy," Policy Research Working Paper Series 595, The World Bank.
    31. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    32. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    33. de Mesa, David & Webb, David C., 1992. "Efficient credit rationing," European Economic Review, Elsevier, vol. 36(6), pages 1277-1290, August.
    34. Harris, Milton & Raviv, Artur, 1979. "Optimal incentive contracts with imperfect information," Journal of Economic Theory, Elsevier, vol. 20(2), pages 231-259, April.
    35. Swinnen, Johan F. M., 1993. "The development of agricultural policies in Central and Eastern Europe : An endogenous policy theory perspective," Food Policy, Elsevier, vol. 18(3), pages 187-191, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Curtiss, Jarmila, 2012. "Determinants of Financial Capital Use: Review of theories and implications for rural businesses," Working papers 122846, Factor Markets, Centre for European Policy Studies.
    2. Stein, Jeremy C., 2003. "Agency, information and corporate investment," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 2, pages 111-165, Elsevier.
    3. Curtiss, Jarmila, 2012. "Determinants of Financial Capital Use: Review of theories and implications for rural businesses," Factor Markets Working Papers 123, Centre for European Policy Studies.
    4. Poitevin, Michel, 1989. "Information et marchés financiers : une revue de littérature," L'Actualité Economique, Société Canadienne de Science Economique, vol. 65(4), pages 555-589, décembre.
    5. Lewe, Stefan, 2003. "Wachstumseffiziente Unternehmensbesteuerung," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 20042, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    6. Mario Tirelli & Luca Spinesi, 2021. "R&D financing and growth," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 30(1), pages 24-47, January.
    7. Ibrahimo, M.V. & Barros, C.P., 2009. "Relevance or irrelevance of capital structure?," Economic Modelling, Elsevier, vol. 26(2), pages 473-479, March.
    8. Valentina Peruzzi, 2017. "Does family ownership structure affect investment-cash flow sensitivity? Evidence from Italian SMEs," Applied Economics, Taylor & Francis Journals, vol. 49(43), pages 4378-4393, September.
    9. Alfonsina Iona, 2019. "Modelling the Relation between Managers, Shadow Cost of External Finance and Corporate Investment," Mathematics, MDPI, vol. 7(11), pages 1-10, November.
    10. Mario Tirelli, 2021. "On the optimal investment finance of small businesses," Small Business Economics, Springer, vol. 56(4), pages 1639-1665, April.
    11. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95, June.
    12. Martinsson, Gustav, 2009. "Finance and R&D Investments - is there a debt overhang effect on R&D investments?," Working Paper Series in Economics and Institutions of Innovation 174, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    13. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    14. Valérie Revest & Alessandro Sapio, 2012. "Financing technology-based small firms in Europe: what do we know?," Small Business Economics, Springer, vol. 39(1), pages 179-205, July.
    15. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    16. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
    17. Romain FOGO PAWO, 2020. "déterminants objectifs de l’endettement en contexte de rationnement du crédit," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 11(2), pages 280-292, December.
    18. Jocelyn Martel, 1996. "Solutions au stress financier : Un survol de la littérature," CIRANO Working Papers 96s-03, CIRANO.
    19. Parker, Simon C, 2002. "Do Banks Ration Credit to New Enterprises? And Should Governments Intervene? President's Lecture Delivered at the Annual General Meeting of the Scottish Economic Society 4-5 September 2001," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(2), pages 162-195, May.
    20. César Camisón & José Antonio Clemente & Sergio Camisón-Haba, 2022. "Asset tangibility, information asymmetries and intangibles as determinants of family firms leverage," Review of Managerial Science, Springer, vol. 16(7), pages 2047-2082, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfpoli:v:24:y:1999:i:1:p:21-47. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/foodpol .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/foodpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.