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Mind the Gap: City-Level Inflation Synchronization
Author:
Mr. Serhan Cevik
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https://orcid.org/0000-0002-2373-2023
Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 166
Language:
English
Publication Date:
02 Sep 2022
DOI:
https://doi.org/10.5089/9798400218613.001
ISBN:
9798400218613
ISSN:
1018-5941
Pages:
17
Keywords:
Inflation synchronization; subnational; transition economies; Lithuania; inflation subcomponent; inflation synchronicity; headline inflation inflation rate; correlation analysis; inflation dynamics; Inflation; Consumer price indexes; Consumer prices; Global financial crisis of 2008-2009; Housing; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The post-pandemic rise in consumer prices across the world has renewed interest in inflation dynamics after decades of global disinflation. This paper provides a spatial investigation of inflation synchronicity at the city level in Lithuania using disaggregated monthly data during the period 2000–2021. The empirical analysis provides strong evidence that (i) the co-movement of city-level inflation rates—estimated using the instantaneous quasi-correlation approach—is significantly weaker than the extent of synchronization suggested by the simple correlation analysis; (ii) there is substantial heterogeneity in the instantaneous quasi-correlation of inflation subcomponents between city pairs; and (iii) there are significant changes in the degree of city-level synchronization over time, reflecting important economic developments in history such as the global financial crisis, the adoption of euro, and the COVID-19 pandemic.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 166