Determinants of food price inflation in Pakistan
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Date
2011
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Abstract
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.
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Keywords
Food Price Inflation, Demand Side Factor, Supply Side Factor
Citation
Paper presented at 1st International Conference on Business Management, 5th – 6th January 2011, Lahore - Pakistan, 69-88.