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The Impact of Credit Market Imperfections on Farm Investment in Poland

Listed author(s):
  • Laure Latruffe

The objective of this article is to confirm the presence of imperfections on the rural credit market in Poland in the second half of the transition period, and to identify farms that were the most affected by these imperfections. For this, an investment accelerator model augmented with a cash flow variable was used on panel data for individual farms during 1996-2000. The cash flow coefficient was found to be significant and positive, indicating a poorly functioning rural credit market, in the sense that for some farms internal funds were the only source of funds (for farms facing credit rationing) or a less expensive source (for farms facing high borrowing costs) than debt. Farms facing more severe credit constraints were then identified by splitting the sample into two groups according to a single criterion but also by creating classes with a multiple component analysis. Farms less collateralisable were found to have experienced the most severe constraints. This finding is in line with other existing studies on Polish farms and is in contradiction with Polish government intervention that favoured subsidised loans rather than guaranteed credit during the period studied.

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Article provided by Taylor & Francis Journals in its journal Post-Communist Economies.

Volume (Year): 17 (2005)
Issue (Month): 3 ()
Pages: 349-362

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Handle: RePEc:taf:pocoec:v:17:y:2005:i:3:p:349-362
DOI: 10.1080/14631370500204370
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