Land Reform in the Credit Cycle Framework: The Case of Ukraine

Abstract

In this work, I show that land reform can affect business cycle dynamics through the financial accelerator. For this purpose, I employed a conventional framework for Dynamic Stochastic General Equilibrium models with collateral constraints to model the effect of agricultural land reforms. The model was estimated on the basis of Ukrainian data and tested with an impulse response function analysis. I found that the collateralization of agricultural land leads to a quantitatively significant additional loan-to-value shock amplification compared to the case when land cannot be used to secure loans.

Keywords

• credit cycles
• land reform
• collateral constraints
• financial accelerator