Re-examining agricultural output-economic growth nexus in Nigeria: New insights from Dynamic ARDL and Kernel-based Regularized Least Squares
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Abstract
The role of agriculture in reforming social and economic framework of an economy cannot be over-emphasized. It is against this backdrop, this study re-investigate the impact of agricultural output on real output in Nigeria for the period 1981-2019, while controlling for manufacturing output, broad money supply, real effective exchange rate and inflation. We employ a dynamic simulated autoregressive distributed lag model developed by Jordan and Philips (2018) and the Kernel-based Regularized Least Squares (KRLS) proposed by Hainmueller and Hazlett (2014) with useful application in the determination of causal-effect relationship using machine-learning algorithm to implement the pointwise derivatives. Empirical result show that, all regressors except conventional money supply are insignificant in the short-run, while an increasing effect of agricultural output and decreasing effect of unconventional monetary policy on economic growth is reported in the long run. Using the KRLS, we find that, higher agricultural output, increase economic growth at a higher level to a threshold where decreasing marginal returns take place. This indicate that increase in agricultural output is not always growth stimulating. Thus, we are of the opinion that, policymakers in formulating agricultural policy should exercise caution in advocating for increase in agricultural output beyond what is normal for growth while the negative impact of unconventional monetary policy on economic growth calls for caution by the monetary authority.
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