Risk Management in Agricultural Productivity: Assessing the Impact of Macroeconomic Volatility in South Africa
Keywords:
Agricultural productivity, Macroeconomic volatility, Risk management, South African agricultureAbstract
Economists universally champion the shift for moving from an agrarian to formal economy, while this structural transition entails substantial risks concerning the vital role of domestic agriculture in maintaining food security, creating employment and generating revenue. This study further advances the knowledge regarding efforts to achieve synergy between the fields of economics and agriculture, focusing on the resulting challenges in risks stemming from their mutual influence. The objective of this study is to examine the impact of macroeconomic volatility on agricultural productivity. Quarterly data is used to examine the short run and long run relationship between these variables, using a Vector Error Correction Model (VECM). Quarterly data effectively captures the short-term, cyclical and seasonal dynamics amongst the variables of interest. The main findings of this study are that macroeconomic volatility has a greater long-term impact on agricultural productivity due to the longer production cycles from planting to harvesting, that is highly dependent on externalities. This emphasises that more rigorous focus is needed on the systemic and spill-over effects of policy and economic decisions on agricultural productivity, and the subsequent effect on the welfare of end consumers.
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