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Short and Long Run Effects of Monetary Policy on Food Inflation: A Study of Pakistan

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  • Choudary Ihtasham Ali
  • Sami Ullah
  • Umar Ijaz Ahmed
  • Abd Ur Rehman
  • Hafiz Zahid Mehmood
  • Mudassar Yasin
  • Mohsin Raza

Abstract

Food plays a major role in the consumption basket of developing countries such as Pakistan, with a significant portion of the insufficient income of poor individuals spending on food. Therefore, higher food inflation severely affects the purchasing power of poor people. This study is designed to estimate the short and long-run impacts of monetary policy on food inflation in Pakistan. For this purpose, time series data from September 2005 to October 2020 was used through the Autoregressive Distributed Lag (ARDL) model. The findings indicate that food inflation can become stable by restrictive monetary policy in both the short and long run. The results show that the short-run shocks can be adjusted at the speed of 13.9% per month. To tackle food inflation, a balanced monetary policy is suggested. On the other hand, a fiscal policy providing subsidized food items to people can also be implemented to tackle food inflation in Pakistan.

Suggested Citation

  • Choudary Ihtasham Ali & Sami Ullah & Umar Ijaz Ahmed & Abd Ur Rehman & Hafiz Zahid Mehmood & Mudassar Yasin & Mohsin Raza, 2023. "Short and Long Run Effects of Monetary Policy on Food Inflation: A Study of Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 5(2), pages 146-154.
    • Handle: RePEc:adx:journl:v:5:y:2023:i:2:p:146-154
    DOI: 10.52223/j.econimpact.2023.5203
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