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literature review
Literature Review
Understanding CPI has always been an area of interest in theoretical as well as empirical economics research around the world .There are several factors that effect the prices of goods that are included as a part of the ‘ basket of goods’ that is used to determine the CPI. These goods mainly include the items that are used everyday by a consumer. These include bothf ood and non food items such as wheat, rice, clothing, shelter, fuels, and other goods and services that consumers buy for day-to-day living
Oil prices are one of the most important determinants influencing domestic prices and hence the CPI of a country. Ali et al. (2012) examined the impact of Oil prices on food sector prices in Pakistan by using 10 years data 2001 to 2010. Results indicated that oil prices are having highly positive and significant impact on both food and non food inflation in Pakistan. Ahmed and Donoghue (2010) have proved the relationship between increase in import prices of petroleum and industrial raw material on output prices in Pakistan by using Computable General Equilibrium Model (CGE). Similarly, Javid and Munir (2011) also proved the existence of positive relationship between oil price shocks and inflationary pressure on domestic economy of Pakistan.
Khan and Qasim (1996) in their paper concluded that another major contributor to the rising food commodity prices has been money supply, value-added in manufacturing, the wheat support price, and the price of utilities. On the other hand Nonfood inflation is determined by money supply, real gross domestic product (GDP), import prices, and electricity prices. It is not surprising that changes in the wheat support price should affect the Consumer price index, given that wheat products account for a major portion of the index. Using ordinary least squares, Khan and Gill (2007) analyzed the impact of money on both food and general price indices for the period 1975–2007. Through their research they found out

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