THE IMPACT OF MACROECONOMIC POLICIES ON AGRICULTURE IN SWAZILAND: AN EMPIRICAL ANALYSIS (1980-2012)

Abstract

Policymakers in Swaziland view agriculture as an engine to foster economic growth, reduce poverty and eradicate inequality among the populace when the right policies are formulated and implemented within their rightful institutional framework. This study is an empirical investigation of the effect of macroeconomic policies on the agricultural sector in Swaziland using annual time-series data for the period 1980 to 2012. The study used the bound test approach to cointegration to analyse the data. The cointegration results revealed that there was long run relationship amongst the variables of agriculture GDP and export. The results also revealed that real money supply, real exchange rate, real GDP, and real government expenditure had a significant long run impact on agriculture GDP with elasticity coefficients of 0.07, 0.24, 0.88 and -0.3 respectively, while short run coefficients were -0.002,0.23,-0,94 and -0.4 respectively.  In the case of agriculture exports, the results further revealed that real money supply, real government expenditure, discount rate, real exchange rate and real GDP had a significant impact on the sector`s exports with long run elasticity coefficients of 0.13,-0.32,-0.01,0.5 and 2.53 respectively, while short run elasticities were 0.06,0.35,0.01,0.46 and -1.34 respectively.The Central Bank of Swaziland needs to adopt policies aimed at providing affordable credit to agriculture. In terms of the low response of the agricultural sector to macro-policy variables the study recommends that policymakers should intensify the promotion of finished or processed agriculture exports and create a disincentive to imports.

Keywords: Agriculture, exports, prices, macroeconomic policy, cointegration, autoregressive distributed lag model (ARDL), Swaziland.