Abstract
Purpose. The study aims to examine the nexus between agricultural productivity by connecting oil prices, economic growth, and financial development. Design/Methodology/Approach. A newly formulated ARDL model was used to estimate an agricultural productivity nexus model using annual time-series data from 1962 to 2016. Innovation and additive structural break unit root tests were applied to determine the existence of unit roots, and the results reaffirmed that all the variables were stationary at first difference. The Chow Breakpoint test was applied to confirm a structural break in the year 2008 caused by the effects of the 2008 financial crisis. Findings and Implications. The results depicted a long-run relationship linking agricultural productivity, oil prices, economic growth, financial development and a financial crisis. The results also showed that financial development and economic growth have positive effects on agricultural productivity. The empirical findings further suggested that an increase in oil prices and the prevalence of a financial crisis have severe adverse effects on agricultural productivity. Originality. The study provides a novel viewpoint of agricultural productivity by connecting oil prices, economic growth, and financial stability and development. The study successfully demonstrated that the financial sector and oil price stability are pivotal for enhancing agricultural productivity initiatives. This study highlights the policy implications of the estimated results for policymakers seeking to boost agricultural productivity by addressing economic misfortunes induced by oil shocks and a financial crisis.
Highlights
Agriculture used to be the centre of national and global decision making with organizations such as the United Nations and the World Food Programme underscoring the need to boost agricultural productivity (Garnett et al, 2013)
Based on the computed innovation-outlier unit root results (Table 2.), we can establish that LAP and LOP are stationary at first differences while LEG and LFD are stationary at level
The innovation-outlier break type test results shown in Table 3. confirmed that all the variables are stationary at first difference. These results entail that the variables have similar integration orders, which were not affected by the 2008 structural break did not influence the variables’ order of integration
Summary
Agriculture used to be the centre of national and global decision making with organizations such as the United Nations and the World Food Programme underscoring the need to boost agricultural productivity (Garnett et al, 2013). This stemmed from ideas that asserted that agricultural productivity goes a long way towards alleviating poverty (Irz, Lin & Thirtle, 2001; Thirtle, Lin & Piesse, 2003). It is highly believed that agricultural productivity is one of the critical strategies that can be used to attain Sustainable Development Goals (SDGs), (Bebbington & Unerman, 2018). It is estimated that revenue oil resulted in a surge in the USA’s gross domestic product by 10% in 2018 (Journal of Petroleum, 2019)
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