Is there any Impact of Money Supply and Exchange Rate on Agricultural Prices?

This study analyzed the long-run neutrality of money supply and exchange rate on Pakistan’s agricultural prices using the Least Square Estimator (LSE) and Johansen & Jusileius from 1975 to 2016. The result shows that the exchange rate’s neutrality does not hold in the long run. Simultaneously, the money supply coefficient is insignificant in the long run, emphasizing the neutrality of money. Some unobservable factors such as demand and supply are empirically included in the model, showing those agricultural prices influenced by other elements in the short and long run. Therefore, the result suggests that the monetary authorities can control the exchange rate through proper policies to overcome the overshoot problem of agricultural prices in Pakistan.