Does financial development enhance agricultural production in the long-run? Evidence from China

This study aims to examine the impact of financial development on agricultural production in the case of China. The study used country level time-series data for the period 1989 to 2016. We applied the autoregressive distributed lag (ARDL) approach to investigate the long-term cointegration relationship between underlying variables and the fully modified ordinary least squares (FMOLS) for robustness check. Results of this study confirm the existence of a long-term relationship among the variables. The ARDL estimation results reveal that financial development has a significantly positive impact on agricultural production in both long-run and short-run. The fully modified OLS confirm the robustness of the findings. This study suggests that the Chinese government should pay more attention on long-run policies to enhance agricultural growth through improving banking sectors, efficient rural credit markets, and increasing township banking infrastructures in the country.