Assessing the effect of climate change and financial development on agricultural production in ASEAN-4: the role of renewable energy, institutional quality, and human capital as moderators.

This paper examines the effect of climate change and financial development on agricultural production in ASEAN-4, namely Indonesia, Malaysia, the Philippines, and Thailand from 1990 to 2016. Further, we explore the role of renewable energy, institutional quality, and human capital on agricultural production. Since the shocks in one country affect another country, we use second-generation modeling techniques to find out the relationship among the variables. The Westerlund (2007) cointegration tests confirm long-run relationship among the variables. The results from cross-sectionally augmented autoregressive distributed lag (CS-ARDL) model reveal that climate change negatively affects agricultural production; on the other hand, renewable energy, human capital, and institutional quality affect positively agricultural production. Moreover, renewable energy utilization, human capital, and intuitional quality moderates the effect of carbon emission on agricultural production. In addition, a U-shaped relationship exists between financial development and agricultural production, suggesting that financial development improves agricultural production only after reaching a certain threshold. Hence, this study suggests that ASEAN-4 countries must adopt flexible financial and agricultural policies so that farmers would be benefitted and agricultural production can be increased.