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African Journal of Economic Review

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The dynamic synergies between agricultural financing and economic growth of Tanzania

Fintan Paul, Aulelius Lema

Abstract


We apply the recently developed asymmetric ARDL cointegration methodology of Shin et al. (2011) to analyse the relationship between agricultural financing and economic growth of Tanzania. In this approach, short run and long run asymmetries are introduced via positive and negative partial sum decompositions of exogenous variables, and the model is estimable by standard OLS. Our findings reveal supporting evidence of asymmetric interactions among the examined variables in the short run and long run. The findings further reveal that endogenous variables react differently to positive and negative shocks of exogenous variables. Positive shocks of agricultural financing have considerably larger positive impacts on economic growth compared to negative shocks, while any unfavourable economic conditions would clobber agricultural financing. In light of our findings, we conclude that the existing asymmetric relationship between agricultural financing and economic growth should be taken into account and the government should increase its financing of the agriculture sector.

Keywords: Agricultural financing, Economic growth, Asymmetric ARDL model, Tanzania




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