The nexus of money supply and agricultural production within the CEMAC countries
摘要
This article explores the bond between agricultural production and money supply within the Central African Economic and Monetary Community between 1991 and 2022.
Method/designAgricultural production is proxied by the agricultural portion added to the gross domestic product. The exogenous variables include: broad money supply ratio, credit given to the private sector, inflation, capital, and labour are. This study uses the Granger causality and autoregressive distributed lag techniques.
FindingsThe results indicate a negative link between money supply ratio and agricultural value added. A non-significantly negative relationship exists between credit to the private sector and agricultural production. This implies that the credit granted to the private sector is not effectively used for agricultural production; some of it is stifled by inflation while other portions are used in other economic sectors. Inflation, physical capital, and labour positively relate to agricultural production. Unidirectional causality flows from agricultural production to inflation, money supply ratio, and labour. Bidirectional causality oscillates between agricultural production and credit granted to the private sector.
ImplicationsThe governments should apply monetary policies sweeping market processes to regulate the money supply. The Bank of Central African Economic and Monetary Community (BEAC) should use productive policy to ensure satisfactory credit drift to the productive sector. The agricultural and financial sectors should mutually benefit from credit provided by financial institutions.
NoveltyLiterature is conflicting and debating on the nexus between money supply and agricultural production. There are studies that show significantly positive effects of money supply on agricultural production. Others indicate that the money supply has negative effects on agricultural production. Various researches disclose bidirectional causality linking money supply and agricultural production. Others show unit-directional causality among money supply and agricultural production. Also, advanced statistical methods like Granger causality and autoregressive distributed lag techniques are employed which have been rarely used by many past researches. This study reveals a negative correlation between money supply and agricultural value added. The main findings indicate that inflation, physical capital, and labour positively influence agricultural output. Furthermore, the analysis uncovers unidirectional causality from agricultural output to money supply and inflation, alongside bidirectional causality between domestic credit to the private sector and agricultural production. These insights underscore the necessity for effective monetary policies tailored to support agricultural growth in CEMAC zone. The research contributes to understand how monetary policy dynamics affect agricultural productivity, providing a foundation for future investigations into policy frameworks which enhance the agricultural sector's performance in the CEMAC region.