Food Inflation in Nepal and Its Implications
This chapter presents an overview of the long-term trends in food and non-food inflation, and estimates the relative contributions of various food products to overall food inflation. Key findings are that the underlying character of inflation in Nepal changed fundamentally since around 2007 with food inflation becoming much more prominent and a large contributor to overall inflation, vegetables were the top contributor to food inflation, and that food prices are strongly cointegrated with Indian prices, but not non-food price. Unrecorded informal trade with India should explain much of the close price linkages. Food prices tend to be more volatile during periods of high prices and ensuring price stability is a matter of great concern. Further, price surges do not necessarily lead to positive supply response.
Abbreviations (Food Inflation in Nepal chapter)
Augmented Dickey–Fuller (test)
Consumer price index
Consumer price index for industrial workers (India)
Government of India
Government of Nepal
Informal Cross-border Trade
Nepal living standards survey
Nepal Rastra Bank
Wholesale Price Index
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