A Note on Food Inflation in Pakistan

Abstract

Food inflation hurts poor more than rich as poor spend higher proportion of their income on food items compared to rich. Higher global food and crude oil prices in 2008 resulted in higher (than historical average) food inflation in Pakistan. Global food inflation caused food inflation in Pakistan. However, food inflation diffusion has been lower compared to non-food inflation in Pakistan. Food inflation volatility in Pakistan was found to be half of that observed in the world. Compared to global food inflation persistence, there is no evidence of food inflation persistence in Pakistan. However, within the food group, most of the goods which were manufactured exhibited inflation persistence. With the help of comparison of food inflation with wage increases for labour (after 2008 global commodity prices shock), the poor (labour class) was found to be at disadvantage