Research on World Agricultural Economy

Digital Finance as a Dual Force: Growth Promotion and Risk Smoothing in Asia-Pacific Agriculture

Zhenlian Tang

Department of National Economy, Peoples’ Friendship University of Russia Named after Patrice Lumumba, Moscow 117198, Russia

DOI: https://doi.org/10.36956/rwae.v7i3.2876

Received: 30 October 2025 | Revised: 16 December 2025 | Accepted: 31 December 2025 | Published Online: 24 July 2026

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Abstract

The agricultural sector is highly vulnerable to external shocks. However, traditional financial services often have limited reach in rural areas. Digital finance has emerged as a transformative solution to this problem. Nevertheless, robust empirical evidence on its dual role in fostering growth and stability remains scarce, especially in the Asia-Pacific region. Using a Panel Vector Error Correction Model (VECM) on data from 15 Asia-Pacific economies (2001–2021), this study examines the dynamic interplay among the Peking University Digital Financial Inclusion Index (PKU-DFII, hereafter DF), agricultural value-added (lnAGDP), and the rolling standard deviation of output growth—the proxy for agricultural risk (RISK). The findings confirm a significant long-run cointegrating relationship. Digital finance exerts a strong, albeit delayed, positive effect on agricultural growth while simultaneously reducing output volatility, confirming its risk-smoothing function. Moreover, the error correction mechanism reveals rapid adjustment, and impulse response analysis verifies a bidirectional causal link. Agricultural growth, in turn, stimulates deeper digital finance penetration, establishing a reinforcing feedback loop. I conclude that digital finance serves as both a "growth engine" and a "stabilizer." Therefore, policymakers should prioritize building an integrated policy ecosystem that links digital finance with agricultural development, thereby fostering synergies that enhance economic resilience and sustainable growth.

Keywords: Digital Finance; Agricultural Economy; Risk Smoothing; Panel VAR; Financial Inclusion

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