Effect of financial development on agricultural output growth in Ghana

Abstract

This study examines the effect of financial development on agricultural output growth, using autoregressive distributed lag model (ARDL) as the estimation strategy. The ARDL results suggest that the effect of financial development on agricultural output growth is positive and significant in both long run and short run. Specifically, our empirical analysis confirms that credit to the private sector is favourable for agricultural-output growth while net domestic credit and ratio of liquid liabilities to GDP are unfavourable for agricultural-output growth. However, three financial development indexes exert a positive impact on agricultural output, implying that an efficient financial market promotes agricultural growth. Hence, policies aimed at ensuring that the financial sector is well-developed can boost the growth of the agricultural sector. However, much effort, resources, and attention should be given to credit to the private sector.

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