Analyzing the Response of the Agricultural Sector’ Growth to Government Investment in the Energy Sector (Time Varying Parameter Approach)

Due to the impact of government policies on the behavior of macroeconomic variables, this study examines the response of the agricultural sector growth to the government investment in the energy sector over the period 1971-2013. To this end, Time Varying Parameter approach along with stochastic volatilities was used. The results showed that the first lags of changes in value-added of agricultural sector, the level and the first lags of changes in employment of agriculture, changes in private sector’ investment in agriculture and changes in government investment in energy sector have the highest impact on the value-added changes of the agricultural sector, respectively. In addition, the coefficients of variables affecting changes in agricultural sector value-added is varying over time, therefore policy-makers in agricultural sector should identify factors causing reduction in value-added of this sector, and present case-based solutions to decrease these fluctuations, and avoid general policy-making.