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

The study aims to examine the impacts of climate change (CC) and financial development (FD) on rice production (RP) in Thailand from the period 1969 to 2016 by using the ARDL and VECM framework. The empirical results revealed that in the long- run (LR) and short-run (SR) there is a reduction in rice production as temperature increase. The carbon dioxide (CO2) positively affects rice production in the (LR), while this connection is negative in the SR. The empirical results further confirmed that in the LR and SR domestic credit provided by the financial sector positively and significantly improved rice production, while domestic credit to private sector by banks negatively affect rice production. The important input factors including cultivated area, fertilizers use and labor force positively and significantly contributed to rice production in both LR and SR. The LR causal link of all variables with rice production is validated. The SR causal association is unidirectional among temperature, CO2 emissions, financial development, labor force and rice production. Additionally, the IRF and VDM outcomes also confirm that both climate change and socioeconomic development are crucial for rice production in Thailand. The study offers important policy implications to improve rice production with the help of improved financial system and climate controls.