Price Setting Behaviour of Pakistani Firms : Evidence from Four Industrial Cities of Punjab

Since the introduction of rational expectations in the literature, most of the research focus in the area of macroeconomics has been investigating micro foundations of macroeconomic theory and transmission channels of policy. In 1990s, macroeconomists started working on macro models incorporating the assumption of nominal rigidity with explicit modeling of optimal behaviour of individuals and firms. More recently, these models gained empirical support by looking at both aggregate as well as at firm-level data. In this regard, limited studies are available that focus on developing countries. For Pakistan, there has been little focus on micro level studies in the field of macro or monetary economics, so our study attempts to fill this gap. Besides capturing price setting behaviour, the potential effects of changes in financial cost on the overall pricing and production decisions have also been investigated. It is important to note that this study is different from others throughout carried in different countries in the sense that instead of sending questionnaires by mail, data are collected by enumerators and field supervisors. It was found that Pakistani firms perceive to be in competitive environment they operate in. Most of the clients of the firms are regular and firms relationship with the customers is long-term. The large majority of firms use current information when reviewing prices. Around 70 percent of firms use either a state-dependent pricing rule or combination of both time-dependent and state-dependent rules. Pakistani firms revise and change their prices usually in the months of June and July. Moreover, costs of raw materials, cost of energy and inflation are the main determinants of price increase while the competitors price, raw materials costs and demand changes are responsible for price decrease. When it comes to the main causes of price stickiness, implicit contract with the customers is at the top, while explicit fixed term contract of prices on the second. Further it was observed that most of the firms change their wages once in a year. About half of the firms index their workers wages with inflation and past inflation rate is usually used for the purpose. Labour productivity and changes in inflation rate are found to be the main causes of wage change.Price Setting Behaviour, Effectiveness of Monetary Policy, Wage and Price Contracts

Price Setting Behaviour of Pakistani Firms: Evidence from Four Industrial Cities of Punjab

Since the introduction of rational expectations in the literature, most of the research focus in the area of macroeconomics has been investigating micro foundations of macroeconomic theory and transmission channels of policy. In 1990s, macroeconomists started working on macro models incorporating the assumption of nominal rigidity with explicit modeling of optimal behaviour of individuals and firms. More recently, these models gained empirical support by looking at both aggregate as well as at firm-level data. In this regard, limited studies are available that focus on developing countries. For Pakistan, there has been little focus on micro level studies in the field of macro or monetary economics, so our study attempts to fill this gap. Besides capturing price setting behaviour, the potential effects of changes in financial cost on the overall pricing and production decisions have also been investigated. It is important to note that this study is different from others throughout carried in different countries in the sense that instead of sending questionnaires by mail, data are collected by enumerators and field supervisors. It was found that Pakistani firms perceive to be in competitive environment they operate in. Most of the clients of the firms are regular and firms’ relationship with the customers is long-term. The large majority of firms use current information when reviewing prices. Around 70 percent of firms use either a state-dependent pricing rule or combination of both time-dependent and state-dependent rules. Pakistani firms revise and change their prices usually in the months of June and July. Moreover, costs of raw materials, cost of energy and inflation are the main determinants of price increase while the competitors’ price, raw materials costs and demand changes are responsible for price decrease. When it comes to the main causes of price stickiness, implicit contract with the customers is at the top, while explicit fixed term contract of prices on the second. Further it was observed that most of the firms change their wages once in a year. About half of the firms index their workers’ wages with inflation and past inflation rate is usually used for the purpose. Labour productivity and changes in inflation rate are found to be the main causes of wage change.Price Setting Behaviour, Effectiveness of Monetary Policy, Wage and Price Contracts

New Keynesian Phillips Curve for Pakistan

Recently macroeconomists have moved to a new neo-classical synthesis by integrating Keynesian features like imperfect competition and nominal rigidities with dynamic stochastic general equilibrium model of the Real Business Cycle Theory with micro foundations and rational expectations, [see, for instance, McCallum and Nelson (1999)]. The standard model comprises of a trinity; consumption and inflation adjustment equations with a monetary authority’s reaction function. One of the pillar of the modelinflation adjustment equation, also known as New Keynesian Phillips Curve (NKPC) in the literature, has at least two important features; unlike the traditional Phillips curve the NKPC is forward-looking; and it has been derived from the profit maximising behaviour of the firms in a monopolistically competitive market structure

Price Setting Behaviour of Pakistani Firms: Evidence from Four Industrial Cities of Punjab

Since the introduction of rational expectations in the literature, most of the research focus in the area of macroeconomics has been investigating micro foundations of macroeconomic theory and transmission channels of policy. In 1990s, macroeconomists started working on macro models incorporating the assumption of nominal rigidity with explicit modeling of optimal behaviour of individuals and firms. More recently, these models gained empirical support by looking at both aggregate as well as at firm-level data. In this regard, limited studies are available that focus on developing countries. For Pakistan, there has been little focus on micro level studies in the field of macro or monetary economics, so our study attempts to fill this gap. Besides capturing price setting behaviour, the potential effects of changes in financial cost on the overall pricing and production decisions have also been investigated. It is important to note that this study is different from others throughout carried in different countries in the sense that instead of sending questionnaires by mail, data are collected by enumerators and field supervisors. It was found that Pakistani firms perceive to be in competitive environment they operate in. Most of the clients of the firms are regular and firms’ relationship with the customers is long-term. The large majority of firms use current information when reviewing prices. Around 70 percent of firms use either a state-dependent pricing rule or combination of both time-dependent and state-dependent rules. Pakistani firms revise and change their prices usually in the months of June and July. Moreover, costs of raw materials, cost of energy and inflation are the main determinants of price increase while the competitors’ price, raw materials costs and demand changes are responsible for price decrease. When it comes to the main causes of price stickiness, implicit contract with the customers is at the top, while explicit fixed term contract of prices on the second. Further it was observed that most of the firms change their wages once in a year. About half of the firms index their workers’ wages with inflation and past inflation rate is usually used for the purpose. Labour productivity and changes in inflation rate are found to be the main causes of wage change.Price Setting Behaviour, Effectiveness of Monetary Policy, Wage and Price Contracts

An Analysis of Pakistan’s Agricultural Commodities based on Effective Protection Rate and Its Decomposition

This study analyses the impact of the government’s interventionist policies in the product and input markets for the two leading crops of Pakistan, wheat, and cotton. The study employs standard measures of the nominal rate of protection (NRP) and effective rate of protection (ERP). In addition, it also proposes a method to additively decompose the ERP into two components representing the effect of distortions in the product and input markets. The study finds that government policies in the wheat market are mostly designed to protect flour mill owners and thereby ordinary consumers at the cost of farmers. Since the consumers of wheat by far outnumber the wheat growers, this policy design seems to represent a political decision to appease the common public. Regarding cotton, the study finds that the government does not intervene much in the market to the extent that farmers are left at the mercy of monopolistic procurement agencies and better-informed rent-seeking intermediaries in the marketing chain. Export procedure is so cumbersome that only the well-informed and well-connected traders can benefit from price hikes in the world market. The study recommends serious reconsideration of government policies in the light of normative considerations. In this context, open debate on agricultural policy in Parliament and the Senate would be highly desirable

Price Setting Behaviour of Pakistani Firms: Evidence from Four Industrial Cities of Punjab

PAKISTAN INSTITUTE OF DEVELOPMENT ECONOMIC

Residue Removal of Pesticides from Brinjal Using Different Processing Methods

The present study was conducted on the residual removal of six pesticides (bifenthrin, profenofos, endosulfan, imidacloprid difenthiuron and emamectin benzoate) from brinjal by using various house hold processing methods such as washing, detergent washing, peeling, drying and cooking/frying etc. The data revealed that high amount of all pesticide residues (above MRLs) were present and unfit for human consumption in raw form. From water soluble pesticides diafenthiuron reduced more in blanching as compared with imidacloprid and emamectin benzoate. Frying reduced the residues more effectively, rendering it fit for human consumption. Washing followed by frying reduced the fat soluble residues >70% whereas water soluble pesticide residues >80%. It was concluded that each processing was found to be effective in reduction of pesticides residues

Removal of Pesticide Residues from Tomato and its Products

Plant protection agents (more commonly known as pesticides) are widely used in agriculture to increase the yield, improve the quality and extend the storage life of food crops. The study was carried out in order to determine the effectiveness of various traditional processing treatments on reducing the residual load of pesticides from tomato and its products. Results showed that lipid soluble pesticides residues were reduced most effectively in sun-drying (90-97%) followed by frying (91-99%) and thermal dehydration (89-90%). The data further indicated that profenofos residues dislodged more effectively than bifenthrin and endosulfan. The least reduction was noticed in endosulfan residues. Similarly in case of water soluble pesticides, the effect of sun-drying, frying and thermal dehydration on reduction of pesticide residues were within the range of 94-97%, 92-96% and 91-96%, respectively. Maximum reduction was found in emamectin benzoate residues followed by imidacloprid and diafenthiuron

Residue Removal of Pesticides from Brinjal Using Different Processing Methods

The present study was conducted on the residual removal of six pesticides (bifenthrin, profenofos, endosulfan, imidacloprid difenthiuron and emamectin benzoate) from brinjal by using various house hold processing methods such as washing, detergent washing, peeling, drying and cooking/frying etc. The data revealed that high amount of all pesticide residues (above MRLs) were present and unfit for human consumption in raw form. From water soluble pesticides diafenthiuron reduced more in blanching as compared with imidacloprid and emamectin benzoate. Frying reduced the residues more effectively, rendering it fit for human consumption. Washing followed by frying reduced the fat soluble residues >70% whereas water soluble pesticide residues >80%. It was concluded that each processing was found to be effective in reduction of pesticides residues