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Testing for the effects of credit crunch on agriculture investment in the EU
Author(s) -
Mamatzakis E. C.,
Staikouras C.
Publication year - 2020
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12229
Subject(s) - agriculture , economics , european union , credit crunch , investment (military) , crunch , vector autoregression , econometric model , macroeconomics , monetary economics , international economics , econometrics , medicine , ecology , biology , politics , political science , law , physical therapy
There are several research papers focusing on the detrimental effects of the credit crunch on the economic performance. A sector of the economy where the implications of the credit crunch have not been thoroughly studied is the agriculture. This is surprising given the importance of agriculture for the European economy. We focus on agriculture in fourteen European Union (EU) Member States in the aftermath of the credit crunch. To this end, we employ the micro‐econometric data set of Farm Accountancy Data Network (FADN) of EU at NUTS 2 level. From a methodological point of view, we model agriculture investment based on a flexible panel Vector Autoregressive (VAR) model that provides impulse response functions (IRFs) and variance decompositions (VDCs). The empirical estimates indicate that agriculture investment has been constrained by negative shocks in interest paid and total liabilities. Unless those financial constraints are eased, agriculture investment in EU would remain rather sluggish at best.