Pass-through of agricultural support to agricultural growth in Turkey: an empirical study based on the time varying parameter vector autoregression model


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Sönmez H.

8th International Izmir Economics & Business Administration Congress, İzmir, Turkey, 23 - 25 February 2024, pp.85-97

  • Publication Type: Conference Paper / Full Text
  • City: İzmir
  • Country: Turkey
  • Page Numbers: pp.85-97
  • Dokuz Eylül University Affiliated: Yes

Abstract

The aim of this study is to examine the transition effect of agricultural support on agricultural growth in Turkey. Agricultural support policies vary over the years in Turkey. It is necessary to utilize models that analyze structural shifts throughout time in order to assess these dynamic changes. The impact of agricultural support shocks on agricultural growth has been evaluated using a time-varying parameter vector autoregressive (TVP-VAR) model in this study. The Tramo/Seat method is applied to seasonally adjust the quarterly data spanning from 2006:Q1 to 2023:Q3. The coefficients for all variables are interpreted as elasticity values, which are computed by taking the natural logarithm. The vector Yt=[(SUPPORTagricultural), (LOANagricultural), (GDPagricultural)] represents the internal variables utilized in both linear VAR and TVP-VAR models. SUPPORTagricultural represents agricultural support payments allocated from the central government budget to the agricultural sector, LOANagricultural indicates the amount of credit utilized for the agricultural sector, and GDPagricultural denotes the value of agricultural gross domestic product in this vector. Two stages have been followed to determine the transition effect of agricultural support payments on agricultural growth. Firstly, the stationary of the variables has been evaluated using unit root tests. Then, the results of the linear VAR model and TVP-VAR model have been analyzed using all variables that have become stationary after taking first differences. According to the impulse response functions of the linear VAR model, the effect of shocks in agricultural support during the 2008 global financial crisis and the 2019 coronavirus pandemic on agricultural GDP is to a great extent similar. During both economic crisis periods, the responses of agricultural GDP fluctuate above or below the initial equilibrium level until the end of the 6th period, which then stabilizes in subsequent periods in response to a shock in agricultural support variables. On the other hand, 10.000 iterations have been performed to approximate the parameters in the TVP-VAR models. It has been determined that the transition effect from agricultural support to agricultural GDP is positive when examining the impulse response functions of the TVP-VAR model. Also, positive shocks in agricultural support lead to an increase in agricultural GDP. The highest positive response of agricultural GDP to agricultural support shocks has been calculated as 1.4% in the study period. Furthermore, it is found that the transition effect from agricultural support to agricultural GDP gradually decreases from 2014 onwards. Based on the results obtained from the study, it is considered necessary to increase the share of agricultural support in national income compared to other developing countries and to distribute it effectively, to increase support for technology-intensive production aimed at improving agricultural productivity in the short and long term, to focus on support policies for agricultural inputs that will provide cost advantages in strategically important markets, and to plan policies that will enable not only large agricultural enterprises but also numerous small agricultural enterprises in rural areas to benefit more effectively from agricultural support.