Financial Exposure and Productive Performance in French Arable Farms

This paper examines the dynamic relationship between financial exposure and productive performance in agriculture. To this end, Granger’s concept of causality and VAR representation are used. Indeed, in spite of several studies, the causality and the direction are not clearly defined. However, investigation of this question can provide with valuable information at policy makers to formulate appropriate credit policies. Using a large micro panel of French farmers over 1994−2001, we find that there is a bidirectional causality running from financial constraints and productive performance. Nevertheless, variance decompositions and impulse response analysis suggest a weak relationship existing between these two variables