The Effects of Monetary Policy on Agricultural Output in Eswatini

Mary S. Mashinini, Sotja G. Dlamini* and Daniel V. Dlamini
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Mary S. Mashinini: Department of Agricultural Economics and Management, University of Eswatini, Luyengo, Eswatini
Sotja G. Dlamini*: Department of Agricultural Economics and Management, University of Eswatini, Luyengo, Eswatini
Daniel V. Dlamini: Department of Agricultural Economics and Management, University of Eswatini, Luyengo, Eswatini

International Journal of Economics and Financial Research, 2019, vol. 5, issue 5, 94-99

Abstract: The agricultural sector in Eswatini is viewed as an engine to foster economic growth, reduce poverty and eradicate inequality. The purpose of the study was to investigate the effects of monetary policy on the agriculture Gross Domestic Product (GDP) in Eswatini using annual data for the period starting from 1980 to 2016. Using the Vector Error Correction model (VEC), the empirical results indicated that in the long run, agriculture GDP, exchange rate, interest rate, inflation, broad money supply, and agriculture credit have a negative effect on agriculture GDP in Eswatini. In the short run the study indicated that the variation in agriculture GDP is largely significant caused by the lagged agricultural GDP, interest rate, exchange rate as well as inflation. Money supply and agriculture credit contribute 0.46% and 0.55%, respectively to the variation in agricultural GDP. The study recommends that programs aimed at availing affordable credit to farmers should be prioritized to cushion the agriculture sector against adverse monetary policy shocks in the short to medium term, specifically interest rates, to ensure continuous production.

Keywords: Monetary policy; Agriculture; Vector error correction model; Eswatini; GDP. (search for similar items in EconPapers)
Date: 2019
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