An assessment of asymmetric impact of financial stability and agricultural subsidies on agricultural production in Pakistan
Authors: Khurshid Nabila , Sharif Hamza , Tabash Mosab I. , El Refae Ghaleb A. 
Published: June 2024

Purpose

There will probably be nine billion people on the earth by 2050, meaning food consumption will rise dramatically. Pakistan, the fifth most populous nation in the world, is rapidly expanding its population, making it difficult for the nation to sustain its food supply. Unfortunately, the country's focus on ensuring food security has not kept up with the demographic shifts in its population. However, innovative solutions are sorely needed in the face of several worldwide problems, especially in the crucial agriculture sector. This underscores the need to integrate sustainable financial practices. Considering these circumstances, this research thoroughly examines the intricate relationship inside Pakistan between financial stability (FS), agricultural subsidies, and productivity. Acknowledging the underlying intricacies and asymmetries at work, this study aims to analyze the complex relationships influencing the nation's agricultural production.

Design/methodology/approach

The research tries to shed light on the subtle processes at the intersection of financial stability, agricultural subsidies, and agricultural productivity through a comprehensive investigation of these multiple challenges. A non-linear autoregressive distributive lag (NARDL) technique is used, using a dataset from 1980 to 2022.

Findings

The results show that FS has a mixed impact on agricultural productivity, both positive and negative. Increasing FS_POS has a beneficial influence on agricultural output, linked to a notable 1.404% increase in output. On the other hand, increasing FS_NEG causes a significant 11.441% decrease in agricultural output, demonstrating its negative impact on output. Subsidies for agriculture also have asymmetric impacts; SUB_POS and SUB_NEG influence variations in agricultural productivity. A substantial 2.414% rise in agricultural output is shown by SUB_POS, demonstrating its noteworthy beneficial influence. Conversely, SUB_NEG adds a relatively small increase of 1.659% in agricultural output. However, the different amounts of each person's contribution show how subtle their effects are.

Research limitations/implications

The current study is limited to the relationship between financial stability, agricultural subsidies, and agricultural productivity, considering the inherent complexity and asymmetries at work in Pakistan only. Further studies are required in Asian markets to have a bigger picture of the agricultural sector.

Originality/value

Considering these critical empirical findings, the report recommends strategic strategies to promote long-term agricultural growth in Pakistan. These include providing integrated financial services customized to farmers' needs, such as credit, insurance, and savings alternatives. Transparency and efficiency in procedural frameworks and the formation of efficient public-private partnerships should be prioritized. Furthermore, improving agricultural subsidy schemes emerges as a crucial priority. Targeting marginalized farmers more effectively and optimizing distribution through transparent, digitally driven systems can significantly improve program performance.