Repository of the Research Institute of Agricultural Economics

Impact of interest rates on the decision to insure in agricultural production

Tarasov, Arthur (2013): Impact of interest rates on the decision to insure in agricultural production. Studies in Agricultural Economics, 115 (1). pp. 1-7. ISSN 2063 0476

[img]
Preview
PDF
Download (764kB) | Preview

Abstract

This paper seeks to define the relationship between interest rates and decisions to insure among agricultural producers using the financial methodology. The choices are ultimately reduced to two options: to insure or to limit and absorb risk. Each choice produces a complex cash flow that is compared to the alternative and discounted by several factors. The difference between the options produces a quantitative measure of the financial incentive to insure. Some discounting factors of the cash flows follow the key interest rate to an extent for the latter to influence the decision to insure along with demand for insurance. The proposed method is tested on data from the emerging economy of Ukraine and the United States for the period 2002-2011. All participants of agricultural insurance markets can use the proposed methods to maximise efficiency. The research shows that ceteris paribus agricultural insurance requires bigger government subsidies to be viable under higher interest rates. Further empirical research is suggested.

Item Type: Article
Uncontrolled Keywords: risk management, agricultural insurance, interest rates, demand for insurance
Subjects: Q - Agricultural and Natural Resource Economics – Environmental and Ecological Economics
Q - Agricultural and Natural Resource Economics – Environmental and Ecological Economics > Q00 - General
Depositing User: István Ady
Date Deposited: 06 Feb 2018 16:39
Last Modified: 06 Feb 2018 16:39
URI: http://repo.aki.gov.hu/id/eprint/2162

Actions (login required)

View Item View Item