Theme/Relevant Ministry:

FOOD SECURITY/ FOOD INFLATION:
M/o Food Security; M/o Finance; PM Office; Agricultural Department; District Administration; Pakistan Bureau of Statistics

Project Brief:

This research studies the dynamics of food prices for fifteen commodities in fourteen major cities of Pakistan. The dynamics of food prices are evaluated by estimating the components of inflation such as the frequency of price change, the duration of price change, the average size of price change, the direction (increase or decrease) of price change, the synchronization of price change and also by assessing the volatility of food prices. The results illuminates that the frequency of price change is high in big metropolitan cities for most of the commodities and there is a synchronized price change across cities especially in tea and tomato prices. Moreover, the volatility results shows that the prices of beef, chicken, egg, sugar and all vegetables are highly volatile as compare to other food commodities.

Furthermore, the research also explains the factors of food prices in Pakistan. The findings exhibit that there is a negative and significant impact of real effective exchange rate on wheat prices in long run. Similarly, real interest rate inversely affects wheat and rice prices while has direct impact on tea prices. There is a positive and significant impact of international crude oil prices and international food prices on most of the food commodities. Moreover, the study explains that in long run, the increase in local production significantly reduce the prices of food commodities. It is also attributed that government policy of adjusting (increasing) wheat support prices also has a positive and significant impact on wheat prices.

Public Policy Relevance:

This study evaluates the dynamics of food prices at the commodity and the city levels by analyzing various stylized facts and volatility in food prices. It contributes by computing various stylized facts of food prices. Synchronization Index helps policymakers in identifying the commodities to be intervened at the city level. One of the significant contributions of this study is the assessment of the volatility of different food commodities for major cities in Pakistan. The findings help policymakers in designing policies to control volatility in food prices.

Status:
In progress 90%

Unedited Working Paper and Policy Brief prepared for the Second RASTA Conference can be downloaded from the link: https://pide.org.pk/rasta/2nd-rasta-conference/