Impact of macroeconomic policies on national food security in Pakistan: Simulation analyses under a simultaneous equations framework

Abstract

The UN’s Vision 2050 regarding food security emphasizes a doubling of food production by 2050 to ensure sufficient food availability. It should also be considered that economic accessibility to food depends mainly on food prices in developing countries. Vision 2050 requires proper planning at the national level to ensure that targets are met in the coming years. This study was conducted to analyse the impact of macroeconomic policy decisions on domestic food production and food inflation in Pakistan. A simultaneous equations model, estimated using the generalized method of moments (GMM) with annual data from 1963-1964 to 2013-2014, was developed. Simulation analyses were conducted by using the model to analyse the impact of monetary policy, fiscal policy and energy price policy; policy recommendations are also given. A significant increase in public expenditure for the development of infrastructure and the lowering of energy prices would significantly improve the availability and accessibility parameters of food security in Pakistan. The recent fall in energy prices will also be advantageous for both the availability as well as economic accessibility to food. Tight monetary policy for a limited time period may be helpful to control food inflation, but may also exert some minor adverse effects on food production. Moreover, monetary policy decisions must be taken while considering all sectors of the economy. The results of the study provide some important guidelines for national food security policy that may help in realising the UN’s Vision 2050.