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Financial market policy and agricultural credit in New Zealand 1970 to 1985

Authors
Publisher
Lincoln College, University of Canterbury
Publication Date
Keywords
  • Financial Market
  • Agricultural Credit
  • Monetary Policy
  • Government Intervention
  • Agricultural Sector
Disciplines
  • Agricultural Science
  • Political Science

Abstract

The objective of the research reported in this thesis was to investigate indirect and direct effects on supply of agricultural credit in New Zealand of government policies with respect to the financial market. First, it was hypothesised that financial market interventions might indirectly influence supply of credit to the agricultural sector by causing changes in the structure of the financial market. By way of background, the structure of the New Zealand financial market is described in some detail in this thesis and a survey of rationale for government intervention is presented. Effects of interventions on market structure are reported. They were studied using a theoretical model of a monopolistically competitive financial firm and empirical analysis was carried out using both qualitative and statistical techniques. The general conclusion was that, during the time period studied (1970 to 1985), interventions had very few systematic effects on market structure as measured by institutional shares of deposits and advances outstanding. It was concluded therefore that interventions were unlikely to have had indirect effects on the supply of agricultural credit. The second channel of influence of government interventions that was hypothesised was a direct one. Research on this aspect was restricted to a case study of trading bank lending. A single market model incorporating disequilibrium was used for this purpose. Analysis of the model indicated that interventions had direct effects on the supply of agricultural credit. Owing to data problems however, it was not possible to elicit the exact nature of those effects.

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