The Effects of Financial Development on Value Added of Agriculture in D8 Countries

Document Type : Research Paper

Authors

• m hoomani farahani
• K Shahbazi
• H. R Faalju

Department of agricultural economics,Faculty of agricultural management, Islamic azad university, Maku branch. Maku,Iran

Abstract

    The present study aims to determine the effects of  financial market development on value added  of agricultural sector in D-8 nations from 1995 to 2015 using a nonlinear panel method. The results indicate that financial development with a mild speed (3.16), after going past the threshold (16.10) of value domestic product) will depart from the first model to the second model, and this is the factor of nonlinear connection in the model. The impact of this variable in the first model is positive. But after going to the second model, the impact will turn into a negative one. As for the inflation, in the first model, it is positive and meaningless, but in the second model, it is meaningful and negative, especially with regard to agricultural value added. Investment and labor in both models have a positive and meaningful impact on agricultural value added. While in the second model their effect is mitigated. This decrease, with regard to increased inflation due to increased financial expansion past the threshold, is comprehensible and logical. Ergo, according to the results of the shoddy performance of financial markets in earmarking and channeling credits, essential steps such as establishing a competitive atmosphere in the banking system of developing countries, selecting the appropriate loan applicants, earmarking the funds between various sectors of agriculture and other sectors, must be taken. Last but not least, the way for agricultural growth must be paved, because this sector is one of the key sectors in economic development of countries. 

Keywords

• financial development
• Agricultural Value Added
• Panel Smooth Transition Regression

20.1001.1.20086407.1397.10.38.9.1

---

References

- Bojanic, A.N. (2012). “The Impact of Financial Development and Trade on the Economic Growth of Bolivia”, Journal of Applied Economics, 15(1), 51-70.

- Caldrón, C. & Liu, L. (2003) “The Direction of Causality Between Financial Development and Economic Growth”, Journal of Economic Development, 72(1), 321-334.

- Chen, K.C. Wu, L. & Wen, J. (2013). “The Relationship between Finance and Growth in China”, Global Finance Journal, 24(1), 1-12.

- Liu, W.C. & Hsu, C.M. (2006). “The Role of Financial Development in Economic Growth: The Experiences of Taiwan, Korea, and Japon”, Journal of Asian Economics, 17(4), 667-690.

- Masten, A. Coricelli, F. & Masten, I. (2008). “Non-linear Growth Effects of Financial Development: Does Financial Integration Matter?”, Journal of International Money and Finance, 27(2), 295-313.

- Shahbaz, M., Shahbaz Shabbir, M., & Sabihuddin Butt, M. (2013). Effect of financial development on agricultural growth in Pakistan: New extensions from bounds test to level relationships and Granger causality             tests. International Journal of Social Economics, 40(8), 707-728.

- Shahbaz, M., Van Hoang, T. H., Mahalik, M. K., & Roubaud, D. (2017). Energy    consumption,financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis. Energy Economics, 63, 199-212.

- Suleiman A.B. & Aamer S. A.Q., (2008). “Financial Development and Economic Growth: The Egyptian Experience”, Journal of Policy Modeling, 30(5), 887-898.