Effect of financial development on agricultural output growth in Ghana

Figures & data

Table 1. Pearson correlation coefficient results for the indicators of financial development.

Variable	ln $\left(\frac{\mathit{\text{NDC}}}{\mathit{\text{GDP}}}\right)$	ln $\left(\frac{M2+}{Y}\right)$	ln $\left(\frac{\mathit{\text{MC}}}{\mathit{\text{GDP}}}\right)$	ln $\left(\frac{\mathit{\text{DEPTH}}}{\mathit{\text{GDP}}}\right)$	ln($\frac{\mathit{\text{BM}}}{\mathit{\text{GDP}}}$)	ln($\frac{\mathit{\text{NM}}}{\mathit{\text{GDP}}}$)
ln $\left(\frac{\mathit{\text{NDC}}}{\mathit{\text{GDP}}}\right)$	1
ln $\left(\frac{M2+}{Y}\right)$	0.765	1
ln $\left(\frac{\mathit{\text{MC}}}{\mathit{\text{GDP}}}\right)$	0.901	0.746	1
ln $\left(\frac{\mathit{\text{DPTH}}}{\mathit{\text{GDP}}}\right)$	0.722	−0.873	0.783	1
ln($\frac{\mathit{\text{BM}}}{\mathit{\text{GDP}}}$)	0.913	0.769	0.769	−0.814	1
ln($\frac{\mathit{\text{NM}}}{\mathit{\text{GDP}}}$)	−0.891	−0.715	0.896	0.870	−0.972	1

Table 2. Principal component of financial development indicator.

Principal component	Eigen values	Proportion	Cumulative
1	3.333	0.555	0.555
2	1.372	0.229	0.784
3	0.966	0.161	0.945
4	0.266	0.045	0.989
5	0.055	0.009	0.999
6	0.006	0.001	1.000

Note. Component 1, 2, 3….6 contains different financial development indicators but we utilized the first three component because they explained approximately 95% variation in the original data.

Table 3. Scoring coefficient of the various proxies of financial development.

Component variable	Scoring coefficient
	1	2	3	4	5	6
$\mathit{\text{NDC}}/\mathit{\text{GDP}}$	0.491	0.338	0.138	−0.219	−0.284	−0.705
$M2+/Y$	0.484	−0.151	−0.012	0.834	−0.200	0.084
$\mathit{\text{MC}}/\mathit{\text{GDP}}$	0.504	−0.271	−0.302	−0.145	0.797	−0.075
$\mathit{\text{DEPTH}}/\mathit{\text{GDP}}$	0.489	0.331	0.125	−0.336	−0.176	0.701
$\mathit{\text{BM}}/\mathit{\text{GDP}}$	−0.168	0.775	0.397	0.350	0.458	−0.001
$\mathit{\text{NM}}/\mathit{\text{GDP}}$	−0.041	−0.282	0.557	−0.001	0.052	0.0032

Note. Component 1 reflects $\mathit{\text{NDC}}/\mathit{\text{GDP}},$ $M2+/Y,$ $\mathit{\text{MC}}/\mathit{\text{GDP}}$ and $\mathit{\text{DEPHT}}/\mathit{\text{GDP}},$ component depicts $\mathit{\text{NDC}}/\mathit{\text{GDP}},$ $\mathit{\text{DEPTH}}/\mathit{\text{GDP}}$ and $\mathit{\text{BM}}/\mathit{\text{GDP}}$ while component 3 shows $\mathit{\text{MC}}/\mathit{\text{GDP}},$ $\mathit{\text{BM}}/\mathit{\text{GDP}}$ and $\mathit{\text{DEPTH}}/\mathit{\text{GDP}}.$ Thses were derived based on scoring coefficient of 0.3 and higher following previous studies.

Table 4. Unit root estimates.

	ADF test with intercept				PP test with intercept
Variables	Level	1st difference	I(d)	Level	1st difference	I(d)
AGRO	0.414	−7.774***	I(1)	0.611	−4.621**	I(1)
NDC/GDP	0.687	−6.117**	I(1)	0.155	−5.576**	I(1)
M2+/Y	0.885	−4.959**	I(1)	1.111	−9.851***	I(1)
MC/GDP	0.885	−6.429***	I(1)	0.581	−8.158**	I(1)
DEPTH/GDP	1.165	−7.099***	I(1)	1.386	−9.113**	I(1)
BM/GDP	−7.659**	−8.499***	I(0)	−4.699**	−6.430***	I(0)
lNM/GDP	−6.891**	−4.099**	I(0)	−6.986***	−3.979**	I(0)
${\mathit{\text{FD}}}_{\mathit{\text{index}}1}$	−5.891**	−6.7981***	I(0)	−8.993***	0.113	I(0)
${\mathit{\text{FD}}}_{\mathit{\text{index}}2}$	0.121	−5.602**	I(1)	0.093	−5.987**	I(1)
${\mathit{\text{FD}}}_{\mathit{\text{index}}3}$	−9.021**	0.0120	I(0)	−9.098***	1.012	I(0)
$\mathrm{\text{INF}}$	−6.451**	−4.87**	I(0)	−7.439***	−6.091**	I(0)
L	0.309	−8.309***	I(1)	0.234	−7.954***	I(1)
FER	1.102	−5.099**	I(1)	0.0981	−8.225***	I(1)
$\mathrm{\text{TEM}}$	−8.875***	−4.098**	I(1)	−7.991***	−7.893***	I(1)
RF	0.309	−6.113**	I(0)	0.110	−8.091***	I(0)

Note: Robust standard errors in parentheses. ***P < 0.01, **P < 0.05, *P < 0.1.

Table 5. Bounds test estimates for cointegration.

	F-stat**	Critical value
		95% bound		90% bound
		I(0)	I(1)	I(0)	I(1)
(1a)FAGRO(AGRO|NDC, INF,L,FER, TEM,RF)	5.011	3.41	4.01	3.01	3.99
(2a)FAGRO(AGRO|MC, INF,L,FER, TEM,RF)	5.660	3.34	4.04	3.02	4.01
(3a)FAGRO(AGRO|DEPTH, INF,L,FER, TEM,RF)	4.99	3.75	4.03	3.01	3.89
(4a)FAGRO(AGRO|BM, INF,L,FER, TEM,RF)	5.32	3.42	4.12	3.03	3.79
(5a)FAGRO(AGRO|NM, INF,L,FER, TEM,RF)	4.98	3.21	4.21	3.01	3.98
(6a)FAGRO(AGRO|FDIndex1, FDIndex2, FDIndex3, INF,L,FER,RF)	5.22	2.11	3.11	2.97	4.87
(7a)FAGRO(AGRO|FDIndex1, FDIndex2, FDIndex3, INF,TEM,RF)	4.99	2.33	3.98	2.01	3.02
(8a)FAGRO(AGRO|FDIndex1, FDIndex2, FDIndex3, INF,L,FER,TEM)	5.65	2.12	4.01	2.94	4.89

Note. **P < 0.05.

Table 6. Long run effect of financial development on agricultural output growth.

Variable	(1a)	(2a)	(3a)	(4a)	(5a)	(6a)	(7a)	(8a)
lnNDC/GDP	−0.215** (0.035)
lnMC/GDP		0.810** (0.091)
lnDEPTH/GDP			−0.407*** (0.066)
lnBM/GDP				0.199 (0.132)
lnNM/GDP					0.022 (0.041)
${\mathit{\text{lnFD}}}_{\mathit{\text{index}}1}$						0.450** (0.049)	0.845** (0.089)	0.761** (0.082)
${\mathit{\text{lnFD}}}_{\mathit{\text{index}}2}$						0.182** (0.031)	0.392** (0.051)	0.583** (0.068)
${\mathit{\text{lnD}}}_{\mathit{\text{index}}3}$						0.818** (0.122)	0.146*** (0.021)	0.359** (0.062)
$l\mathrm{\text{nINF}}$	−0.102** (0.034)	−0.256** (0.056)	−0.350* (0.082)	−0.180** (0.042)	−0.807** (0.156)	−0.360* (0.118)	−0.046* (0.021)	−0.146** (0.031)
lnL	1.479*** (0.238)	0.197** (0.023)	0.541** (0.091)	0.542** (0.091)	0.409*** (0.067)	0.389** (0.081)		0.845** (0.079)
LnFER	0.134*** (0.027)	0.216** (0.032)	0.811** (0.098)	0.238** (0.051)	0.397** (0.078)	0.191* (0.051)		0.613** (0.091)
$\mathrm{\text{LnTEM}}$	0.807*** (0.074)	0.293** (0.056)	0.451* (0.151)	0.329** (0.049)	0.799* (0.362)		0.665** (0.091)	0.791** (0.079)
LnRF	1.570*** (0.321)	0.950** (0.152)	0.710** (0.251)	0.553** (0.123)	0.251** (0.026)	0.541** (0.081)	0.937** (0.122)
Constant	1.031 (0.981)	0.243* (0.082)	0.082* (0.041)	0.199 (0.132)	1.529 (0.926)	0.201 (0.134)	2.665 (0.990)	2.967 (0.989)

Note: Robust standard errors in parentheses. ***P < 0.01, **P < 0.05, *P < 0.1.

Table 7. Short-run ARDL results.

Variable	(1a)	(2a)	(3a)	(4a)	(5a)	(6a)	(7a)	(8a)
ΔlnNDC/GDP	−0.085** (0.015)
ΔlnMC/GDP		0.095 (0.051)
ΔlnDEPTH/GDP			−0.079 (0.055)
ΔlnBM/GDP				0.099* (0.036)
ΔlnNM/GDP					0.049 (0.031)
${\Delta \mathit{\text{lnFD}}}_{\mathit{\text{index}}1}$						0.050 (0.040)	0.084** (0.012)	0.076 (0.051)
${\Delta \mathit{\text{lnFD}}}_{\mathit{\text{index}}2}$						0.182 (0.128)	0.091** (0.021)	0.058 (0.068)
${\Delta \mathit{\text{lnFD}}}_{\mathit{\text{index}}3}$						0.071 (0.122)	0.145 (0.121)	0.098** (0.092)
$\Delta l\mathrm{\text{nINF}}$	−0.201** (0.024)	−0.106** (0.016)	−0.250** (0.022)	−0.098** (0.022)	−0.474** (0.036)	0.206** (0.038)	−0.066* (0.041)	−0.069** (0.013)
Δln ${\mathrm{\text{INF}}}_{\mathrm{t}-1}$	−0.121** (0.022)	−0.091** (0.021)	−0.111** (0.021)	−0.089** (0.021)	−0.131** (0.021)	−0.099** (0.013)	−0.081** (0.012)	−0.089** (0.012)
ΔlnL	0.079** (0.023)	0.297** (0.033)	0.401** (0.031)	0.211** (0.091)	0.095** (0.015)	0.189** (0.021)		0.405** (0.079)
ΔlnFER	0.406** (0.037)	0.106** (0.032)	0.111** (0.048)	0.238 (0.251)	0.097** (0.018)	0.091* (0.032)		0.061** (0.011)
Δln ${\mathrm{\text{FER}}}_{\mathrm{t}-1}$	0.121 (0.110)	0.096** (0.017)	0.196 (0.180)	0.116** (0.021)	0.216** (0.043)	0.196** (0.021)		0.086** (0.015)
$\Delta \mathrm{\text{lnTEM}}$	0.087** (0.014)	0.093** (0.021)	0.151* (0.051)	0.209** (0.049)	0.199* (0.032)		0.066** (0.013)	0.098** (0.019)
ΔlnRF	0.097** (0.021)	0.095** (0.022)	0.071** (0.021)	0.053** (0.130)	0.198** (0.026)	0.054** (0.041)	0.097* (0.032)
Δln ${\mathrm{\text{RF}}}_{\mathrm{t}-1}$	0.087 (0.081)	0.101** (0.021)	0.107** (0.031)	0.103** (0.021)	0.137** (0.031)	0.197** (0.044)	0.127** (0.034)
ECM(−1)	−0.091** (0.014)	−0.143* (0.062)	−0.092* (0.031)	−0.099** (0.032)	−0.219** (0.026)	−0.181* (0.064)	−0.165** (0.033)	−0.096** (0.019)

Note: Robust standard errors in parentheses. ***P < 0.01, **P < 0.05, *P < 0.1.

Table 8. Reliability and diagnostic tests.

Diagnostic	Test approach	(1a)	(2a)	(3a)	(4a)	(5a)	(6a)	(7a)	(8a)
Normality	Jarque-Bera test	1.911	2.011	0.891	1.053	0.943	0.403	2.043	1.043
		(0.209)	(0.189)	(0.312)	(0.101)	(0.301)	(0.107)	(0.089)	(0.081)
Serial correlation	Breusch- Godfrey LM test	2.011	1.699	1.111	1.301	2.014	0.893	1.114	1.830
		(0.301)	(0.218)	(0.193)	(0.201)	(0.431)	(0.331)	(0.222)	(0.121)
Heteroskedasticity	Breusch-Pagan-Godfrey test	1.178	2.143	1.043	1.981	0.843	2.390	2.105	1.013
		(0.314)	(0.201)	(0.101)	(0.109)	(0.101)	(0.310)	(0.123)	(0.145)
Functional form	Ramsey reset test	2.019	2.143	0.643	0.438	1.943	3.003	0.943	2.301
		(0.215)	(0.201)	(0.189)	(0.109)	(0.101)	(0.201)	(0.341)	(0.201)
CUSUM	CUSUM test	Stable	Stable	Stable	Stable	Stable	Stable	Stable	Stable
CUSUMQ	CUSUMQ test	Stable	Stable	Stable	Stable	Stable	Stable	Stable	Stable

Source: Authors estimation. Probability values in parentheses.

Table 9. Effect of financial development on agricultural output growth using FMOLS.

Variable	(1a)	(2a)	(3a)	(4a)	(5a)	(6a)	(7a)	(8a)
lnNDC/GDP	−0.310** (0.041)
lnMC/GDP		0.510** (0.061)
lnDEPTH/GDP			−0.372*** (0.046)
lnBM/GDP				0.199 (0.105)
lnNM/GDP					0.122 (0.097)
${\mathit{\text{lnFD}}}_{\mathit{\text{index}}1}$						0.225** (0.029)	0.404**(0.057)	0.301** (0.042)
${\mathit{\text{lnFD}}}_{\mathit{\text{index}}2}$						0.401** (0.042)	0.211** (0.031)	0.304** (0.043)
${\mathit{\text{lnFD}}}_{\mathit{\text{index}}3}$						0.511** (0.052)	0.205** (0.032)	0.219** (0.031)
$l\mathrm{\text{nINF}}$	−0.202** (0.024)	−0.167** (0.014)	−0.530* (0.041)	−0.208** (0.034)	−0.270** (0.034)	−0.160* (0.015)	−0.263* (0.031)	−0.406** (0.041)
lnL	0.209** (0.034)	0.209** (0.032)1	0.401** (0.037)	0.402** (0.045)	0.105*** (0.014)	0.197** (0.019)		0.543** (0.045)
LnFER	0.241*** (0.035)	0.112** (0.012)	0.301** (0.041)	0.189** (0.021)	0.407** (0.045)	0.217* (0.031)		0.431** (0.042)
$\mathrm{\text{LnTEM}}$	0.305*** (0.032)	0.103** (0.013)	0.151* (0.012)	0.297** (0.015)	0.199* (0.021)		0.513** (0.051)	0.341** (0.031)
LnRF	0.304*** (0.021)	0.560** (0.052)	0.431** (0.051)	0.434** (0.043)	0.510** (0.036)	0.401** (0.035)	0.317** (0.022)
Constant	0.103** (0.011)	0.134* (0.012)	0.122* (0.023)	0.209 (0.025)	0.295** (0.026)	0.104 (0.013)	0.150 (0.014)	0.167 (0.104)

Note. Robust standard errors in parentheses. ***P < 0.01, **P < 0.05, *P < 0.1.

Data availability

World Development Indicators: https://databank.worldbank.org/source/world-development-indicators. WorldBankGroupClimateChangeKnowledgePortal:https://climateknowledgeportal.worldbank.org/download-data. Food and Agricultural Organization of the United Nations: http://www.fao.org/faostat/en/#data. World Economic Outlook (IMF): https://www.imf.org/en/Publications/SPROLLs/world-economic-outlook-databases.