Does financial development enhance agricultural production in the long-run? Evidence from China

This study aims to examine the impact of financial development on agricultural production in the case of China. The study used country level time-series data for the period 1989 to 2016. We applied the autoregressive distributed lag (ARDL) approach to investigate the long-term cointegration relationship between underlying variables and the fully modified ordinary least squares (FMOLS) for robustness check. Results of this study confirm the existence of a long-term relationship among the variables. The ARDL estimation results reveal that financial development has a significantly positive impact on agricultural production in both long-run and short-run. The fully modified OLS confirm the robustness of the findings. This study suggests that the Chinese government should pay more attention on long-run policies to enhance agricultural growth through improving banking sectors, efficient rural credit markets, and increasing township banking infrastructures in the country.

Automated summary

This study examines the impact of financial development on agricultural production in China. The findings suggest that financial development has a significantly positive impact on agricultural production in both the long-run and short-run. Therefore, the Chinese government should focus on long-term policies to enhance agricultural growth by improving the banking sector, efficient rural credit markets, and increasing the infrastructure of township banks.