Impact of Monetary Policy on Food Prices: A Case Study of Pakistan

Abstract

This study investigates the potential impact of monetary policy on food prices in Pakistan in long run and short run by employing Johansen cointegration technique and vector error correction model, respectively. Monthly time series data from July 1991 to May 2014 were used. This study found that there was a significant relationship between food prices and monetary variables (money supply, and discount rate) in the long run while there was no significant relationship in short run, this study further found that seasonal variation were more responsible for short run fluctuations in the food prices.