Global Commodity Prices and Inflation in a Small Open Economy

Muhammad Hanif, Javed Iqbal and Imran Naveed Khan ()
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Imran Naveed Khan: State Bank of Pakistan

No 76, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: Global commodity prices surge of 2007-08 sent an inflationary shock across the countries. 2014 global prices descend resulted in significant disinflation in many countries and even deflation in some economies. We have explored the linkages between global commodity prices fluctuations and inflation in small open economy, Pakistan. Global price fluctuations are found to be dominant sources of inflation dynamics in Pakistan during July 1992 to June 2014. Food inflation and overall inflation in Pakistan is linked to international food prices changes. Non-food and administered prices’ inflation are result of global oil price increases. For core inflation, global prices of metal and cotton matter most. Global commodity prices changes impact overall inflation in Pakistan rather quickly compared to monetary policy actions. Core inflation takes longer to respond to all type of shocks including global price fluctuations. Monetary and exchange rate policies do have role in influencing inflation outcome in Pakistan (barring administrated prices’ inflation).

Keywords: Global Commodity Prices; Exchange Rate; Money Supply; Inflation (search for similar items in EconPapers)
JEL-codes: E31 E51 F62 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2016-04
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Global Commodity Prices and Inflation in a Small Open Economy (2016)
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