Economic Analysis of Food Commodity Prices in Urban Food System: A Case Study of Rawalpindi

Pakistan is one of the countries facing high food price inflation in the world, especially in the latest period. The food system includes resources, production and transportation, processing, manufacturing, retail and food consumption sectors, incorporating its impacts on the environment, human health, and societal issues. Food price is an important indicator of agricultural production. The study is designed to analyze the role of food commodity prices and their different indicators in the urban food system, especially in the Rawalpindi district. The secondary data on the prices of food commodities were collected from various sources. The Augmented Dickey-Fuller (ADF) unit root test is used to evaluate the stationarity of the data. The data was stationary at first difference. The Johansen co-integration technique based VAR model and (VECM) was applied to explore long-run relationships. Maximum lag selection for the ADF unit root test has been determined using the Schwarz Information Criterion. The inflation expectations (inertia) are reflected in a 0.7-point increase in CPI food concerning the previous year’s change. To the extent that GDP per capita increases by one unit (one rupee), food price inflation increases by 0.0017 units. The finding reveals that household income and payment transfer strongly impact food prices compared to oil prices. It is concluded that there is demand-pull inflation instead of cost-push inflation. The government should take policy measures to control food inflation