Abstract
The particular study was undertaken to examine whether the inflation rate is related to agricultural production and vice versa, and Wholesale Price Index inflation for food articles is related to agricultural production and vice versa. The study was based on secondary data collected from various authentic sources by employing Engle & Granger (1987) two-step co-integration. The empirical result revealed that trends in agricultural production on both headline and food inflation trends are co-integrated and have a long-run relationship. Interestingly, it is observed that the relationship between inflation rate and agricultural production is negative and the sensitivity of inflation to changes in agricultural production is larger than that of agricultural production to changes in inflation rates. The result also establish that WPI for food articles and agricultural productions are co-integrated and increase in agricultural production has significant negative impact on food prices in the long run.
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