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An empirical study of the impact of bank credit on agricultural output in South Africa

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dc.contributor.advisor Makina, Daniel
dc.contributor.author Chisasa, Joseph
dc.date.accessioned 2015-04-21T11:22:55Z
dc.date.available 2015-04-21T11:22:55Z
dc.date.issued 2014-12
dc.identifier.citation Chisasa, Joseph (2014) An empirical study of the impact of bank credit on agricultural output in South Africa, University of South Africa, Pretoria, <http://hdl.handle.net/10500/18511> en
dc.identifier.uri http://hdl.handle.net/10500/18511
dc.description.abstract In the literature there are mixed results on the link between credit and agricultural output growth. Some authors argue that credit leads to growth in agricultural output. Others view growth as one of the factors that influence credit supply, thus growth leads and credit follows. By and large, studies have not endeavoured to establish the short-run impact of agricultural credit on output. They are generally limited in establishing the long-run relationship between credit and agricultural output and thus present a research gap in this respect. This study contributes to the existing body of literature by focusing on the finance-growth nexus at sectoral level as a departure from extant literature that has focused on the macroeconomic level. Using South African data, the study investigated the causal relationship between the supply of credit and agricultural output as well as whether the two are cointegrated and have a short-run relationship. The study found that bank credit and agricultural output are cointegrated. Using the error correction model (ECM), the results showed that, in the short-run, bank credit has a negative impact on agricultural output, reflecting the uncertainties of institutional credit in South Africa. However, the ECM coefficient shows that the supply of agricultural credit rapidly adjusts to short-term disturbances, indicating that there is no room for tardiness in the agricultural sector. The absence of institutional credit will immediately be replaced by availability of other credit facilities from non-institutional sources. Conventional Granger causality tests show unidirectional causality from (1) bank credit to agricultural output growth, (2) agricultural output to capital formation, (3) agricultural output to labour, (4) capital formation to credit, and (5) capital formation to labour, and a bi-directional causality between credit and labour. Noteworthy and significant for South Africa is that for the agricultural sector, the direction of causality is from finance to growth, in other words supply-leading, whereas at the macroeconomic level, the direction of causality is from economic growth to finance, in other words, demand-leading. Applying a structural equation modelling approach to survey data of smallholder farmers, the positive relationship between bank credit and agricultural output observed from analysis of secondary data was confirmed. en
dc.format.extent 1 online resource (xiv, 235 leaves)
dc.language.iso en en
dc.subject Bank credit en
dc.subject Agricultural output en
dc.subject Granger causality en
dc.subject Cointegration en
dc.subject ECM en
dc.subject SEM en
dc.subject South Africa en
dc.subject.ddc 338.130968
dc.subject.lcsh Agricultural credit -- South Africa en
dc.subject.lcsh Agricultural industries -- South Africa -- Finance en
dc.subject.lcsh Agricultural industries -- South Africa -- Econometric models en
dc.subject.lcsh Agriculture -- Economic aspects -- South Africa en
dc.subject.lcsh Agricultural productivity -- South Africa en
dc.title An empirical study of the impact of bank credit on agricultural output in South Africa en
dc.type Thesis en
dc.description.department Business Management en
dc.description.degree DCOM (Business Management)


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