Does Agricultural Credit Mitigate the Effect of Climate Change on Cereal Production? Evidence from Sichuan Province, China

Abstract

This study attempts to investigate the effects of global climate change (via temperature and rainfall) on cereal production in Sichuan over the 1978–2018 period, whether agricultural credit combining with technical progress (i.e., mechanical farming rate) mitigate the effect of climate change. The present study empirically analyzed the short-term and long-term interrelation among all the considered variables by using the autoregressive distributed lag (ARDL) model. The results of the ARDL bounds testing revealed that there is a long-term cointegration relationship between the variables. The findings showed that temperature significantly negatively affected cereal production, while rainfall significantly contributed to cereal production in the context of Sichuan province, China. Agricultural credit, especially in the long run, significantly improved cereal production, implying that agricultural credit is used to invest in climate mitigation technologies in cereal production. Findings further indicated that the mechanical farming rate significantly enhanced cereal production, indicating that technical progress has been playing a vital role. This study suggests that the policymakers should formulate more comprehensive agricultural policies to meet the financial needs of the agricultural sector and increase support for production technology.