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The Effects of Monetary Policy on Agricultural Output in Eswatini

Author

Listed:
  • 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)

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.

Suggested Citation

  • Mary S. Mashinini & Sotja G. Dlamini* & Daniel V. Dlamini, 2019. "The Effects of Monetary Policy on Agricultural Output in Eswatini," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 5(5), pages 94-99, 05-2019.
    • Handle: RePEc:arp:ijefrr:2019:p:94-99
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    References listed on IDEAS

    as
    1. Brooks,Chris, 2008. "RATS Handbook to Accompany Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9780521896955, January.
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