Publication detail

Credit Guarantees in A credit Market with Adverse Selection

Author(s): prof. Ing. Karel Janda M.A., Dr., Ph.D.,
Type: IES Working Papers
Year: 2003
Number: 40
Published in: IES WP 2003/40
Publishing place: Prague
Keywords: Adverse Selection, Government Intervention, Agricultural Credit
JEL codes: D82, G38, P34, Q14
Suggested Citation:
Abstract: The paper deals with government interventions in agricultural credit markets in the Czech Republic. We first describe the institutional setting and the empirics of the agricultural credit in the Czech Republic. We explain the activities of the Czech Agricultural Guarentee Fund and compare them with similar institutions dealing with the support of agricultural credit in transition and developed market economies. Then we introduce an adverse selection model of credit provision with proportional credit guarantees. Our model distinguishes two market regimes - a developed post-transition market economy and a transition economy. This distinction between the transition and post-transition economies leads to different results generated by credit markets. Most notably, there is a failure of collateral as a screening instrument in a credit markets of transition economies. With economic stabilization collateral resumes its role as a screening instrument.
Downloadable: WP 40


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