Abstract
This study looks at the impact of monetary policy on South African agriculture, making use of the linkages that exist between interest rates, the macroeconomic environment and the agricultural sector. Utilising yearly data from 1970 to 2011, this study empirically investigates the impact of monetary policy on agricultural gross domestic product in South Africa using Vector Error Correction Model (VECM). The study finds that inflationary shocks and the money market rate have an enormous negative impact on the performance of the Agricultural GDP whilst the manufacturing index and the stock market help to improve the agricultural GDP. A unit increase in money market rate results in a decrease in the Agricultural GDP by approximately 0.021 percentage points. The study concludes that it is imperative for South Africa’s monetary policy authorities’ and agricultural sector policy makers as well participants to consider carefully the interaction between the macroeconomic environment, agricultural sector and stock prices. DOI: 10.5901/mjss.2014.v5n1p613
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