Effects of Inflation on Agricultural Commodities

Abstract

This study examines both the natural world and the volatility of the pricing agents in Pakistan. This study investigates the causes of increased prices of agricultural commodities and food products in Pakistan. The IMF, World Bank, IFS (International Financial Statistics), and SBP (State Bank of Pakistan) provided sufficient data to conduct this research. We studied the dynamics of conditional volatility for agricultural commodities versus food product prices and explained the diffusion between these two. The study indicates that the selected commodities are affected by various factors including the volatility effect, the mean of interest rates, and the exchange rate. In addition, the volatility of wheat prices has a significant effect on the rice price series. In contrast, the cost of chicken has no impact on the average cost of beef or any other commodity. Most commodities, excluding oil and cotton, have been found to have a considerable impact on their present prices due to the influence of pricing. Farmers should be encouraged to utilize hedging mechanisms in the future to lessen price volatility.