Credit and municipal agricultural production in the Northeast: A spatial econometric approach

Abstract

The mechanisms of reach and the expansion of credit granted to Brazilian agriculture have become determinants of production in the sector on a national scale. Thus, this study aims to analyze the effects of agricultural credit on the gross value of agricultural production (GDP) in the Northeast region. Through an exploratory analysis of spatial data and spatial econometrics, it is possible to verify the significant and positive impact of credit, both granted through the Constitutional Financing Funds and the National Development Bank (BNDES), on the GDP of agriculture in the Northeast. The Durbin Spatial Model of Error (SDEM) was estimated and chosen from the tests of Robust Lagrange Multipliers, the Moran Index of the residuals under randomization, and the Monte Carlo simulation of Moran’s I. The results unequivocally demonstrate that credit, along with the amount of rainfall, the number of agricultural pieces of machinery, and the use of fertilizer in the soil, has positively impacted the agricultural GDP in the northeastern municipalities over the years analyzed. These findings have significant implications for the agricultural sector, particularly in the Northeast region, and can inform policy and practice.