IMF Working Papers

Mind the Gap: City-Level Inflation Synchronization

By Serhan Cevik

September 2, 2022

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Serhan Cevik. Mind the Gap: City-Level Inflation Synchronization, (USA: International Monetary Fund, 2022) accessed December 3, 2024

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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.

Keywords: Inflation synchronization, Lithuania, Subnational, Transition economies

Publication Details

  • Pages:

    17

  • Volume:

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  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2022/166

  • Stock No:

    WPIEA2022166

  • ISBN:

    9798400218613

  • ISSN:

    1018-5941