Agriculture growth in Ghana: A time-series analysis with autoregressive distributed lag approach

Abstract

AbstractThe lack of empirical research on the effect of financial development and interest rate on agricultural growth hinders effective policy orientation towards poverty reduction. This paper is set to examine the effect of financial development and interest on agricultural growth from the Ghanaian perspective. We used time-series data for the period 1980–2020. The time-series autoregressive distributed lag approach was used to investigate the relationship between the underlying variables. The cumulative sum chart and cumulative sum of squares statistics were used to show that our model is stable and does not contain any serious structural change. The results show that financial development and interest rates have a significantly positive effect on agricultural growth in both the long-run and short-run. The results also suggest that the government should pay more attention to both short-term and long-term policies to enhance agricultural growth through improving macroeconomic variables like reducing interest rate and enhancing accessibility to agricultural financial services in the country. We propose that agribusinesses be encouraged by enacting new financial reforms to stimulate agri-based commercial ventures, particularly in the agricultural sector. We further suggest that in order to boost agricultural growth in the country, the government should focus on lowering the prices of agri-based inputs such as seeds, fertilizers, and fuel, as well as encouraging research and development efforts. By analyzing the effect of financial development and interest rate on agricultural growth, this paper contributes to evidence-based explanations for the need to implement policies that will boost agricultural production and, hence, poverty reduction.

Keywords

• financial development
• interest rates
• agricultural growth
• autoregressive distributed lag
• Ghana