Department of Economics

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Determinants of food price inflation in Pakistan
(2011) Muhammad Abdullah; Rukhsana Kalim
This study focuses on the identification of main determinants of food price inflation in Pakistan. Using the data from 1972 to 2008, Johansen’s co- integration technique isutilized to find out the long run relationships among food price inflation and its determinants like inflation expectations, money supply, per capita GDP, support prices, food imports and food exports. Empirical findings prove the long run relationships among food price inflation and its determinants. All the determinants affect food price inflation positively and significantly except money supply which is insignificant with correct positive sign. Vector Error Correction Model (VECM) has been used for the analysis of short run dynamics. In the short run, only inflation expectations, support prices and food exports affect the food price inflation. The results reveal that both demand and supply side factors are the determinants food price inflation in Pakistan. However, our study supports the structuralist point of view of inflation as money supply shows insignificant results.