The Effect Of Monetary Policy On Agricultural Production Of South Africa

This study looks at the impact of monetary policy on South African agriculture making use of the linkages that exist between gross value of agricultural production, real effective exchange rate, monetary policy rate and agricultural credit using annual data from 1971-2020 and empirically investigates the impact of monetary policy on agricultural production in South Africa using econometrics model such as unit root test, co-integration and vector error correction method.

The results showed that, in the long-run monetary policy rate, agricultural credit and real effective exchange rate have significant impact on gross value of agricultural production. In conclusion, polices that tend to discount rates should be encourages in order to increased gross value of agricultural production, this can be achieved through increasing productivity in agriculture, improve investment in commercial agriculture and food production, improve quality of production and improvement of marketing system.

Agricultural policy makers and monetary policy makers work closely together in designing and implementing monetary policy in South Africa in order to boost agricultural productivity.

Key word: Monetary Policy, gross value of agricultural production, co-integration, vector error correction model.