DETERMINANTS OF HIGH FOOD PRICES The Case of Pakistan

The study aims to analyze the determinants of high food prices in Pakistan by using Autoregressive Distributed Lag approach to cointegration and error correction model for long-run and short-run, respectively. The time series data for the period 1972-73 to 2009-10 has been used. The study has used four determinants named as: GDP, food export, food import and total credit to agriculture sector. The empirical findings of the study show that all the determinants are highly significant in the long-run as well as in the short-run. GDP and food export have been a contributor towards high food prices while food imports and credit to agriculture sector cause the reduction in the food prices. The import prices cause the reduction in the food prices but later on it cause the balance of payment problem through trade deficit which again cause the food price inflation for the next years. The evidence from the empirical results strongly recommends that both export and import of food items must be reduced and credit to agriculture sector must be increased to control food price inflation in Pakistan.