Impact of Monetary Policy on the Performance of Agricultural Sector in Kenya

Steven Owino Adongo, Samuel Otieno John, Philip Zeph and Ruth Nehema Muyima
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Steven Owino Adongo: Department of Agricultural Economics and Resource Management, Moi University-Kenya
Samuel Otieno John: Department of Agricultural Economics and Resource Management, Moi University-Kenya
Philip Zeph: School of Business and Economics (Accounting), Maseno university-Kenya
Ruth Nehema Muyima: Department of Agricultural Economics and Resource Management, Moi University-Kenya

International Journal of Research and Innovation in Social Science, 2020, vol. 4, issue 7, 562-568

Abstract: The agricultural sector is the bedrock of Kenyan economy and exhibit a potential is employment creation, poverty reduction and increasing food security. This study purposed to examine the impacts of monetary policy on the Agricultural sector gross domestic product in Kenya. Using the annual data for the period of 1981 to 2019, the study conducted empirical analysis to determine the relationship between monetary policy and agricultural domestic product using OLS regression model. The monetary policy instruments that were selected are broad money supply (M2), Central Bank Rates (CBR), Cash Reserve Ratio (CRR) and Exchange Rate (ER). Both ADF and Philip-Perron unit root tests were done to confirm if the variables were stationary and Johansen Co-integration test was done to confirm short and long run relationships. The empirical findings revealed that broad money supply has a positive influence on agricultural GDP while exchange rate displayed a negative impact on the performance agricultural sector. Government’s increase of budgetary allocation to support agriculture and monetary policy commission commitment to maintain exchange rate volatility are necessary to realize full potential of agricultural sector.

Date: 2020
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