Threshold Effect of Inflation on Agricultural Growth: Evidence from Developing Countries

Goodness C. Aye and Nicholas Odhiambo
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Goodness C. Aye: Department of Economics, University of South Africa, Pretoria, South Africa

Advances in Decision Sciences, 2021, vol. 25, issue 2, 28-50

Abstract: The paper examined the inflation-agricultural growth nexus in developing countries with the aim of identifying the inflation threshold that could benefit or harm the sector. We used panel data from 1970 to 2019 and the dynamic panel threshold model which accounts for endogeneity. Aside from inflation and agriculture GDP growth, we included the foreign direct investment (FDI), domestic credit to the private sector, and urbanization as control variables. The results show that credit has an enhancing effect on agriculture while urbanization has a diminishing effect. More importantly, we established that the inflation threshold is 5.997 %. Below this threshold, the effect of inflation on agricultural growth is positive, while the effect above the threshold is negative and stronger.

Keywords: Agriculture; Dynamic panel; Growth; Inflation; Threshold. (search for similar items in EconPapers)
JEL-codes: C23 E31 E52 O47 Q10 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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