Bank Credit and Agricultural Output in Bangladesh: An Econometric Analysis

Abstract

In this study, the authors tried to identify the relationship between bank credit and agricultural output in Bangladesh. Simultaneously impact assessment of bank credit on agricultural output is also investigated. Different econometric techniques are used to determine the nature of the relationship between bank credit and agricultural output and the impact of bank credit. A total of 40 years (1981-2020) of annual time series data were collected from the Annual Reports of the Bangladesh Bank and World Bank’s world development indicators. Stationarity and cointegration tests were performed initially and then analyzed with Vector Error Correction Model, confirming a long-run relationship between bank credit and agricultural output. Additionally, univariate and multivariate OLS models are performed to identify the magnitude of bank credit’s impact on agricultural output. Both models revealed that bank credit positively and significantly affects agricultural production in Bangladesh. Based on these findings, the authors recommend additional fund allocation to the agricultural production system by the banks in Bangladesh.