Role of agricultural finance and investment in reducing rural poverty in Ghana: insights from wavelet coherence analysis

Abstract

This work examines the critical role of agricultural finance and investment in reducing rural poverty in Ghana, focusing on the dynamic interactions between financial support, government expenditure, inflation, and poverty levels. The study uses advanced econometric techniques, particularly wavelet coherence analysis, to examine how these factors influence rural poverty across different time horizons and frequency domains. We employed monthly data from 1990 to 2022 to determine the effectiveness of agricultural finance and public investments in addressing poverty at various levels. The results indicate that while agricultural finance plays a vital role in poverty reduction, it often acts as a reactive measure, responding to rising poverty levels rather than preempting them. Government expenditure on agriculture shows a more immediate and direct bearing on dropping rural poverty, emphasizing the importance of consistent community investment. Additionally, the study finds that inflation has a complex and indirect influence on rural poverty, affecting different regions and populations in varied ways. These findings offer important insights into the need for sustained and strategic financial policies and investments to mitigate rural poverty in Ghana effectively.