Relationship between public expenditure on agriculture and agricultural production in Nepal
Date
2023
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Central Department of economics
Abstract
This study aims to investigate the relationship between the government expenditure on
agriculture and agricultural production in Nepal from 1975/76 to 2021/22. The
empirical research has applied Vector Autoregressive model for the time series data
from 1975/76 to 2021/22. Agriculture is chiefly recognized as a mainstream economic
sector in Nepal for the overall development and remained a major concern to the
government, businesses, and to the general people in large. However, the share of
agriculture in national GDP is reported to be in decreasing each year. The main
objective of the study is to analyze relationship between public expenditure on
agriculture and agriculture GDP. The study considers capital and recurrent
expenditure on agriculture as the components of public expenditure on agriculture. The
empirical research has applied Vector Autoregressive model for the time series data
from 1975/76 to 2021/22. The study revealed that there is short run relationship
between capital expenditure and recurrent expenditure in agriculture and agriculture
GDP. The empirical results of the estimated model demonstrated that, for AGDP itself,
first lagged period has significant positive influence on current period. The absolute
value of coefficient of first period lag has a great influence on AGDP at current period
than that of second period lag. Similarly, recurrent expenditure in first lagged period
has positive influence on AGDP at current period. However, recurrent expenditure in
second lagged period seems to have negative influence on AGDP at current period.
Capital expenditure in first lagged period has positive influence on AGDP at current
period. However, capital expenditure in second lagged period seems to have negative
influence on AGDP at current period. The study concludes that expenditure on capital
aspects plays a vital role to increase agricultural productivity and production whereas
contribution of recurrent expenditure on AGDP is not statistically significant. Granger
causality test showed that there is unidirectional relationship between public
expenditure in agriculture and agricultural GDP. Thus, government should emphasize
on increasing expenditure on agriculture along with their logical allotment and timely
implementation.
Keywords: Public expenditure, Capital expenditure, Recurrent expenditure,
Agriculture GDP, VAR model, Granger Causality test, Residual test.
Description
Keywords
Public expenditure, Recurrent expenditure