The empirical analysis of cereal production under the climate exchange and examining the effects of banks’ domestic credit on cereal production: Evidence from Turkey

Abstract

In this study, it aims to examine the linkage among climate change, banks’ domestic credit and cereal production such as Turkey's CO2 emissions, average rainfall and average temperature in the period 1980-2019. In the study, firstly, the stationarity properties of the variables are examined by KPSS, ADF and Ng-Perron tests, and the presence of cointegration between the variables is investigated through the ARDL boundary test. Then, the long-run elasticities of the independent series are estimated by applying the ARDL model and the causality linkage among the series is detected through VECM method. Empirical findings show that there is cointegration among the variables and that in Turkey, banks’ domestic credit, CO2 emissions, average rainfall and increase in cereal production area increase cereal production, while average temperature increase reduces cereal production. At the same time, it is determined that there is a bidirectional causality between banks’ domestic credit, CO2 emissions, average rainfall and average temperature and grain production, while there exists a uni-directional causality extending from the grain production area to the grain production. Finally, as a result of the examinations, it is detected that there exists a mutual linkage between the financial sector and cereal production.