The Relationship between Commercial Bank Loans and the Bank for Agriculture and Agricultural Cooperatives Loans and Growth of Thai Agricultural Sector

Abstract

The purposes of this research were to study the relationship between agricultural credit provided by commercial banks and the Bank for Agriculture and Agricultural Cooperatives and the growth of Thai agricultural sector, and to conduct causality test.   Secondary data were collected from Q2/2004 to Q4/2017. The cointegration using Engle and Granger’s method indicated that the agricultural credits provided by the Bank for Agriculture and Agricultural Cooperatives, and by commercial banks, and gross domestic product in agriculture sector were co-integrated in the long run. The results of Granger Causality Test revealed that there was the bidirectional causality between the agricultural credits provided by the Bank for Agriculture and Agricultural Cooperatives and gross domestic product in agriculture sector. In contrast, there was no causal relationship between agricultural credits provided by commercial banks and gross domestic product in agriculture sector. Therefore, to stimulate economic growth in the agricultural sector, the government should provide agricultural credit to farmers via the Bank for Agriculture and Agricultural Cooperatives. This would result in the higher expansion of gross domestic product in agricultural sector. Higher agricultural productivity would generate more income to farmers and raise their ability to pay for debts and to apply for more credits.