Mind the Gap: City-Level Inflation Synchronization
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Summary:
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.
Series:
Working Paper No. 2022/166
Frequency:
regular
English
Publication Date:
September 2, 2022
ISBN/ISSN:
9798400218613/1018-5941
Stock No:
WPIEA2022166
Pages:
17
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