The document models the relationship between food price inflation and money supply using linear regression. It finds a direct, positive relationship where increasing money supply is correlated with higher food price inflation. The regression equation is Pf = 18.580 – 0.676(Ms), indicating food prices equal the intercept plus a negative coefficient times money supply. Analysis of data from 1960-2011 supports this relationship and finds the correlation between food prices and money supply is statistically significant.

2. Model-specification:
 In the model food price is the function of money supply.
FP= f (MS)
•Dependent variable = food prices.
•Money supply = independent variable.
The liner regression equation is given below;
Pf = α + β(Ms)
Where ;
 α is intercept and β is a coefficient of money supply.
There is direct and positive relationship between food prices
and money supply.
As far as money supply is increased in the economy the food
price inflation also increases.

3. Recent Inflationary trend
Years
Food inflation
(in percentage)
Ms2
(in percentage)
1960’s 2.0% 16.3%
1970’s 12.9% 21.0%
1980’s 6.9% 13.2%
1990’s 10.1% 16.8%
2000’s 1.68% 15.0%
2000-2001 3.56% 9.0%
2001-2002 2.50% 15.4%
2002-2003 2.83% 18.0%
2003-2004 6.0% 19.6%
2004-2005 12.5% 19.3%
2005-2006 6.9% 12.8%
2006-2007 10.3% 13.99%
2007-2008 15.0% 8.96%
2008-2009 26.6% 4.59%
2009-2010 14.5% 8.1%
2010-2011 18.4% 11.47%
2011-2012 11.1% 9.09%

4. 0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Food inflation (in percentage)
Ms2 (in percentage)

5. Results and Discussions:
Estimation results were carried out using SPSS Statistics as follow;
Variable
Unstandardized Coefficients
t-values
Sig.
(P-Values)β Std. Error
(Constant) 18.580 4.469 4.158 0.001
MS2 -0.676 0.315 -2.148 0.047
TABLE.2
The Regression Line is ;
Pf = 18.580 – 0.676(Ms)
The hypothesis testing for regression coefficient using 5% of level of
significance, that is there any significant relationship between Pf & MS.
T-Statistic was used. The second probability value is 0.047 is less then
significant level 0.05.
Therefore we reject Ho , and may conclude that there is significant
relationship between Food Prices(inflation) and Money Supply at α=5%.