Volume 8, Number 1, January 2016 Al-Barkaat Journal of Finance & Management/Print ISSN: 0974-7281 Online ISSN: 2229-4503 14 The Consequences of Import of Rice and Wheat on Food Production and Food Inflation in Bangladesh Sirajul Islam* and Shahidul Islam** Al-Barkaat Journal of Finance & Management A Bi-annual Refereed Journal Volume 8, Number 1, January 2016, pp. 14-24 Abstract This paper uses data from 1975 to 2013 to analyze the impact of food imports on food production and inflation of Bangladesh. Unit roots test, co-integration test, error correction model as well as Ganger Causality test have run among three variables such as food production (FP), food import (IM) and food inflation (IN). There is no co-integration between food production (FP) and food import (IM). On the other hand, food import and food inflation are found co-integrated in the long run. But using Ganger Causality test we find unidirectional causality between LNP and LNIM. Ganger Causality test did not show any unidirectional causality between LNIN and LNIM. Government policies and strategies are highlighted regarding food production to show the position of government in this issue. Finally recommendations are made to have fruitful food production pattern as well as most efficient use of food import. Keywords: Food import, Unit root test, Co-integration test, Impulse Response Function. 10.5958/2229-4503.2016.00001.1 1. Introduction Bangladesh is an agri-based economy but there is a mismatch between demand and supply of food so it has to import food items, which may in turn impact our agricultural production and food inflation. With having 43 percent people below poverty line and the rise in food prices; Bangladesh is considered as one of the thirty–seven countries in ‘crises’ according to the report of the Food and Agriculture Organization (FAO). Due to huge oscillation in food price and stumpy income, people endure a lot because typical household in the country spends lion share of its income on food. Rice dominates the production pattern and pricing pattern in our country. FAO/WFP CFSAM has reported in 2008 that about 79.4 percent of the total cultivable land areas were used to produce rice and more than 70 percent of domestic food expenditure has made on rice and wheat consumption in urban areas and almost 80 percent in rural areas. Both rice and wheat contribute a lion share calories intake to the people of Bangladesh. After liberation war of Bangladesh, the fall in production led to huge food import from abroad. In1974, Bangladesh faced an acute food shortage as the price of rice increased sharply in the world market (OECD-FAO 2009) and production decreased (Alamgir 1980). *Assistant Professor, Department of Economics, BUBT, Dhaka, Bangladesh **Student, BUBT, Dhaka, Bangladesh E-mail for correspondence: sirajul@bubt.edu.bd