Determinants of Agricultural Sector Growth in Pakistan: A Time Varying Parametric Approach

Abstract

This study followed time varying parametric approach with general to specific to find out the determinants of agricultural sector output growth in Pakistan. No such research study was found out in empirical literature that could collect relevant determinants of agricultural sector to employ time varying parametric approach. Annual data was taken from World Development Indicators (2014) from period 1976 to 2014. Rolling regression estimates of explanatory variables justify the use of Kalman filtering approach. The state space results indicate that gross fixed capital formation, permanent cropland and remittances receipt adversely affects agricultural sector growth. Whereas, gross national expenditure is directly related to agricultural sector growth. These findings recommend to enlarge gross national expenditures and motivate investors to make investments in agricultural sector. Farmers should be given incentives to cultivate cash crops for better profits.

Keywords: Kalman Filter, rolling regression, gross national expenditure, agricultural sector growth

JEL Classification: E22, E51, F41.