MODELING THE ASYMMETRIC RELATIONSHIP BETWEEN MONETARY POLICY FLUCTUATIONS AND AGRICULTURAL SECTOR’S KEY CROP PRODUCTIVITY IN NIGERIA
The study focused on examining the asymmetric relationship between Agricultural output and monetary policy variables in Nigeria. The key monetary policy variables used include liquidity ratio, commercial bank credit to agriculture, treasury bills, and exchange rate assessing the asymmetric impact on the output of cocoa, rice and cereals within the period of 1981 to 2023. The study employed asymmetric form of ARDL and the following findings revealed that cocoa output in Nigeria is highly sensitive to both the direction and magnitude of shocks in monetary policy variables particularly the exchange rate, liquidity ratio, and commercial bank lending, short-run fluctuations in key monetary policy indicators do not have a statistically significant effect on rice output in Nigeria. This could imply that rice production is more influenced by structural or long-term factors, or that monetary policy tools operate with longer lags in this particular agricultural sub-sector. The results also show that cereal output in Nigeria responds weakly and inconsistently to short-run changes in monetary policy instruments. While some delayed effects from credit and liquidity shocks are evident. Finally, there exist asymmetric relationship between monetary policy variables and the outputs of cocoa, cereals, and rice. This asymmetry means that the agricultural outputs do not adjust linearly to changes in these monetary variables. The study recommend among others that observed asymmetric and inconsistent responses of cocoa, cereal, and rice outputs to monetary policy variables suggest that monetary tools alone are insufficient. Therefore, coordinated policies that combine targeted fiscal incentives (such as input subsidies or tax reliefs for agribusinesses) with favorable monetary interventions (e.g., concessional lending rates for agriculture) are essential to stimulate sustained growth in the agricultural sector.
Key Words: monetary policy dynamics, agricultural sector outputs
JEL Classification: C32, E52, Q10
