How Does Climate Change Affect Rice Production in Thailand? Assessing the Role of Financial Development

30 The study aims to examine the impacts of climate change (CC) and financial development 31 (FD) on rice production (RP) in Thailand from the period 1969 to 2016 by using the ARDL 32 and VECM framework. The empirical results revealed that in the long- run (LR) and short- 33 run (SR) there is a reduction in rice production as temperature increase. The carbon dioxide 34 (CO 2 ) positively affects rice production in the (LR), while this connection is negative in 35 the SR. The empirical results further confirmed that in the LR and SR domestic credit 36 provided by the financial sector positively and significantly improved rice production, 37 while domestic credit to private sector by banks negatively affect rice production. The 38 important input factors including cultivated area, fertilizers use and labor force positively 39 and significantly contributed to rice production in both LR and SR. The LR causal link of 40 all variables with rice production is validated. The SR causal association is unidirectional 41 among temperature, CO 2 emissions, financial development, labor force and rice production. 42 Additionally, the IRF and VDM outcomes also confirm that both climate change and 43 socioeconomic development are crucial for rice production in Thailand. The study offers 44 important policy implications to improve rice production with the help of improved 45 financial system and climate controls. 46


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Attention given to the factors aimed at improving economic growth, specifically, 54 agriculture development to enhance food security, is essential. The reason being that 55 without proper measures to alleviate food insecurity, the world will experience severe 56 hunger (FAO 2017, Pickson &Boateng 2021). Agriculture is one of the critical components 57 that can help enhance the world's food insecurity alleviation agenda (Chandio et al. 2021a, 58 FAO 2013, Issahaku &Abdulai 2020, ). Therefore, interventions and 59 policies to promote agriculture growth need critical thoughtfulness. In Thailand, rice 60 consumption is on the rise, making it a significant contributors of economic development 61 and food security assurance. About 18% of Thailand's arable land is used for producing 62 rice, i.e., approximately 9.38 million hectares are utilized for rice production (OAE 2018). 63 In 2017, the nation recorded 25.24 million tons of rice, significantly contributing to 64 Thailand's economic growth (OAE 2018). The largest rice field (63% of the rice field area) 65 in Thailand can be found in the Northeast region. The suitable climate and geographical 66 variations in the Northeast region have made it a favorable place for rice production, 67 including the Thai Jasmine ("Kao Dok Mali 105" or "KDML105") rice variety, which 68 covers about 66% of the Northeast region rice field area (RD 2016). However, as 69 Thailand's population grows, demand for food, including rice is likely to increase. 70 Therefore, if serious interventions are not made to curtail some challenges (e.g., climate 71 change) distorting Thailand's agriculture production (e.g., rice production), the nation will 72 be threatened with food insecurity due to failure to satisfy domestic rice demand (OAE 73 2018), which may also affect the nation's economic growth.  Shrestha et al. 2017). Again, the demand for crop irrigation water in the nation, which 90 is difficult to come by, increases as rainfall (temperature) reduces (rises); hence, rice 91 production is affected negatively (Chiarawipa &SDOODEE 2020, Mainuddin et al. 2012). 92 According to the IPCC fifth evaluation report, there is a high expectation that the mean 93 surface temperatures will increase up to 4.8°C globally by the close of the 21st century. 94 They also predicted that global precipitation might experience an increase or a decrease 95 depending on latitudes (IPCC 2014). All these reports about climate change above serve as 96 call to the government and policymakers of the nations around the world to provide several 97 initiatives that can promote the agricultural sector, the hardest hit of climatic variations. 98 Although the adverse effect of climate change on agriculture is highly unacceptable, 99 financial development can be considered an effective tool to remedy this menace to 100 enhance the agriculture sector. Therefore, to improve Thailand's rice production and the 101 agriculture sector as a whole, financial development must be given the maximum attention accessibility and farm household productivity. The found out that farmers savings played 120 a significant role in their production. Again, the result revealed that savers were more likely 121 to obtained credit, indicating that peasants will be better-off through their savings and 122 credit received from the financial market. Looking at the imperative advantages of financial 123 development on agricultural growth, we analyze its impact on Thailand's rice production. Thailand rather than financial development. To our knowledge, this is first investigation 130 that assess both LR and SR impacts of climate change and financial development on rice 131 production in the context of Thailand. Also, we employed several econometric techniques 132 such as the A.D.F and P.P conventional unit root testing, the ARDL model, the Johansen 133 co-integration testing, and VECM approaches to achieve the study's main objective. In 134 addition, several diagnostic tests to stabilize the model are applied in this study. The 135 outcomes are particularly significant for policymakers, bringing to the forefront how 136 financial development can improve agricultural productivity (e.g., rice production) in this 137 climate change era as they try to design policies to enhance the nation's agricultural sector.

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The study's organization is as follows; literature review of financial development, climate 139 change, and rice production nexus together with the study's hypotheses are discussed in 140 section 2. Data and methodology of the study are reported in section 3, while section 4 141 provides the empirical outcomes. Last section provides the conclusion of the study. 143 This section offers a conceptual analysis of how climate change as well as financial 144 development can potentially influence rice production.

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Climate change and rice production nexus 146 The harmful emission of carbon dioxide resulting from environmental pollution, climate 147 change, and global warming effect on the agricultural-environmental system is  suggested that policies should be provided to mitigate the adverse effects of climatic 158 variations on crop harvests in the nation, which will enhance food and nutritional security.

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Also, using temperature patterns, carbon dioxide emissions, and rainfall patterns as a proxy negative. However, in the long-run, cereal production increases as the annual mean rainfall 164 increases. The study revealed a prevailing long-run equipoise interconnection among 165 carbon dioxide emissions, moderate temperature, and rainfall patterns, as well as cereal 166 crop yield. The study suggested that policies related to adaptation strategies should be 167 encouraged to improve the nation's cereal production. 168 The study of Yu et al. (2010) established that the Consultative Group for International 169 Agricultural Research (CGIAR) has revealed that Bangladesh agricultural production is 170 likely to reduce due to climate change. This indicates that food insecurity is inevitable, 171 making the country victimize to the high risk of hunger due to poor climatic conditions.

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Another study endorsed that Bangladesh rice production will be the hardest hit (reduction The parameters 1 , 2 , 3 , 4 , 5 , 6 , 7 , and 8 represent the long-run (LR) elasticity 316 estimates while Ω 1 , Ω 2 , Ω 3 , Ω 4 , Ω 5 , Ω 6 , Ω 7 , and Ω 8 denote the short-run (SR) dynamics, the 317 1st differential operator is denoted by Δ, and ε t is the error term. The F-statistics posit by        Table 4. This study used the optimal lag length 2 386 based on the A.I.C. Following the determination of a suitable lag order, the long-term cointegration association 393 amid the study variables was explored. Table 5 shows the long-term cointegration test 394 results. As depicted in Table 5, the calculated F statistic value (4.06**) of the model FLRP   424 Table 7 displays the long-and short-run (LSR) results. The findings of long-and short-run 425 (LSR) imply that the interconnection between average temperature and rice production is   The nexus of cultivated area and rice production has exposed a significant positive    This study applied the VECM Granger causality approach to explore the direction of 492 causality amid the variables, and this approach is appropriate for vital policy implications.

Long-and short-run (LSR) estimations
493 Table 8 reports the VECM estimated findings. The causality connections of all factors with 494 rice production confirm long-run (LR) links of all variables with rice production. The short-495 run (SR) causal association is unidirectional between temperature and rice production.   523 The outcomes are rechecked with Impulse Response Function (IRF) and Variance 524 Decomposition Method (VDM) afar the specified time. The IFR of rice production stated 525 that temperature has negative impact but this impact decreases gradually in long run. The  Additionally, the outcomes of VDM in Table 9 indicate that the impact of financial  the variables exhibited a long-term association among themselves. The findings confirmed 560 that average temperature exerts an inverse effect on rice production in both the SR and LR.

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CO2e exerts a profound impact on rice production in the LR, while the SR exerts a negative 562 effect indicating that the agricultural sector is extremely vulnerable to climate change, 563 resulting in food insecurity, which directly affects rural households' livelihoods in and statistically contributed to rice production in the long-and short-run. These findings 573 suggest that cultivated area, fertilizers use and labor force are important determinants of 574 rice production and played a vital role to enhanced rice production in the case of Thailand.

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The causality connections of all factors with rice production confirm long run links of all 576 variables with rice production. The short-run causal association is unidirectional between 577 temperature and rice production. Furthermore, CO2 emissions, financial development, and 578 labor force are also affecting productivity level in short-run. Finally, the IRF and VDM 579 outcomes also confirmed that both climate change and socioeconomic development are 580 crucial for rice production in Thailand, especially in long-run. The study suggests that 581 Thailand's banking sector should engage with more profound financial activities related to 582 agriculture, especially short and medium-term loans should be provided to the farming 583 community. This will enhance the banking sector's contribution and turn the negative 584 impact of banking credit into positive in the long run. On the same note, climate change 585 and primary factors of agriculture including fertilizers, cultivation area, and labor should 586 be monitored for increased productivity of rice in both long and short run. Therefore, 587 Thailand Government should reform the financial banking sector and expand the credit 588 supply to farming communities based on flexible procedure. To cope with climate change 589 and improve rice production, there is need to launch climate financing scheme through 590 banking sector and grant credit to farmers' at easy instalments.