Purpose This study examines the impact of credit on agricultural growth in Vietnam from 1996 to 2023, focusing on how credit effectiveness differs across prosperity and crop-loss regimes and under varying macroeconomic conditions, particularly business cycles and inflation. Design/methodology/approach A Markov Regime Switching model is employed to capture nonlinear and regime-dependent effects. Annual data from the World Bank and the Food and Agriculture Organization are used to analyze how credit operates under different agricultural and macroeconomic states. Findings Credit significantly supports agricultural growth during crop-loss periods by acting as a financial buffer. However, during prosperity phases, its effect weakens and may even become negative under high inflation, increasing financial risk. These results highlight the importance of macroeconomic stability and cyclical conditions in determining credit effectiveness. Originality/value The study contributes by incorporating business cycles and inflation into the analysis of agricultural credit, applying a nonlinear regime framework, and providing evidence from Vietnam, an emerging economy where agriculture remains crucial for food security and development.
Huy et al. (Thu,) studied this question.