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The impact of credit market imperfections on farm investment in Poland

Author

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  • Laure Latruffe

    (Économie et Sociologie Rurales - INRA - Institut National de la Recherche Agronomique)

Abstract

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.

Suggested Citation

  • Laure Latruffe, 2005. "The impact of credit market imperfections on farm investment in Poland," Post-Print hal-02360567, HAL.
    • Handle: RePEc:hal:journl:hal-02360567
    DOI: 10.1080/14631370500204370
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    References listed on IDEAS

    as
    1. Martin Petrick & Laure Latruffe, 2003. "Credit access and borrowing costs in Poland’s agricultural credit market : a hedonic pricing approach," Working Papers hal-02416849, HAL.
    2. Martin Petrick & Laure Latruffe, 2003. "Credit access and borrowing costs in Poland's rural financial market : a hedonic pricing approach," Post-Print hal-02283470, HAL.
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