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Global Commodity Prices and Inflation in a Small Open Economy

Author

Listed:
  • Muhammad Nadeem Hanif

    (State Bank of Pakistan)

  • Javed Iqbal

    (State Bank of Pakistan)

  • Imran Naveed Khan

    (State Bank of Pakistan)

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).

Suggested Citation

  • Muhammad Nadeem Hanif & Javed Iqbal & Imran Naveed Khan, 2016. "Global Commodity Prices and Inflation in a Small Open Economy," SBP Working Paper Series 76, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:76
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    File URL: http://www.sbp.org.pk/repec/sbp/wpaper/wp76.pdf
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    Cited by:

    1. Antonia C. Settle, 2018. "The Informal Economy as a Site of Liquidity: Pakistan's Land Market," Development and Change, International Institute of Social Studies, vol. 49(5), pages 1291-1313, September.
    2. Nabila Khurshid & Chinyere Emmanuel Egbe & Asma Fiaz & Amna Sheraz, 2023. "Globalization and Economic Stability: An Insight from the Rocket and Feather Hypothesis in Pakistan," Sustainability, MDPI, vol. 15(2), pages 1-19, January.

    More about this item

    Keywords

    Global Commodity Prices; Exchange Rate; Money Supply; Inflation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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