Impacts of Government Spending on Thailandûs Agricultural Sector

Abstract

The research examined the question of how much the expanded government consumption spending has been beneficial to agricultural sector. The study began with the estimation of parameters in the structural model. It revealed the government spending had impact on interest rate, exchange rate, price index and real GDP. These variables linked government spending to the agricultural sector. The estimated parameters were utilized for policy simulation. As simulation results, when the government increased in the budget spending by 5, 10 and 15%, its impacts on agriculture were concluded in terms of percentage change from baseline value. Food consumption rose to 1.04, 2.08 and 3.13%. Food export rose to 0.05, 0.10 and 0.15%. Meanwhile, food import rose to 1.05, 2.11 and 3.16%. Consequently, surplus of trade balance for food worsened to 0.21, 0.43 and 0.64%. In addition, employment in agricultural sector rose to 0.02, 0.05 and 0.07%. Capital stock in agricultural sector also rose to 0.07, 0.14 and 0.21%. Gross domestic production in agricultural sector subsequently rose to 0.23, 0.47 and 0.70%. Thus, Thai Agriculture was affected not only by the spending specifically designed for it, but also by the government consumption spending.