Abstract
Abstract This study was carried out to examine the causal relationship between interest rate policy and agricultural production in a deregulated economic setting in Nigeria using time series data covering 1987 to 2011. The data utilized include data on interest rate and agricultural production which were obtained from various publications of central bank of Nigeria. Augmented Dickey Fuller (ADF) test, Vector autoregression (VAR) lag order selection test and granger causality test were employed in the data analysis and the result indicated that market driven interest rate was not significant in influencing agricultural production over the period of deregulation and this was attributed to the substantial volatility and high market driven interest rate leading to limited accessibility to credit facilities by small scale farmers. It is recommended that the central bank of Nigeria should strongly exercise some measure of interest rate control that favours investment friendly interest rate policy that is supportive of credit mobilization for sustainable agricultural production and also the realization of the goal of Agricultural Transformation Action Plan (ATAP) in Nigeria
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