Demand for Financial Assets in the Farm Sector: A Portfolio Balance Approach

Abstract

Abstract The demand for financial assets in portfolios of farm business‐household units is viewed as a problem of maximization of utility derived from pecuniary and nonpecuniary services provided by portfolio components and unused credit reserves. The statistical model provides simultaneous equations estimates of structural demand equations for commercial bank deposits. Yields on equities, marketable government bonds, and time and savings deposits as well as the service charge rate on demand deposits are shown to be important determinants of demand. The speed of adjustment of actual stocks to desired levels was estimated and comparisons were made with published estimates for other sectors.

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