Analysis of The Relationship Between Agricultural Credit Utilization and Agricultural Input Price Index

Abstract

Objective: This study aims to investigate the relationship between agricultural credit (vital for the continuity of agricultural activities) and the Agricultural Input Price Index, which shapes the cost environment in which these activities take place. Material and Methods: The analysis employs monthly data spanning January 2015 to March 2024. Methodologically, it applies the Fractional-Frequency Fourier ADF unit root test, the Fractional-Frequency Fourier ADL cointegration test, and the Fractional-Frequency Fourier TY causality test. Results: The empirical findings indicate that a 1% rise in the Agricultural Input Price Index is associated with increases in agricultural credit utilization of 0.95% in the long-run and 0.18% in the short-run. The results of the cointegration test are further supported by the results of the causality test. Conclusion: The findings suggest that sustaining agricultural production nationwide requires targeted financial support for all producers engaged in farming—particularly small-scale farmers—through low-or zero-interest credit facilities channelled via publicly capitalized commercial banks. Such support would mitigate the adverse effects of rising input prices, reduce underutilization of essential inputs, and help avert productivity losses. © 2025, Ege Universitesi. All rights reserved.