IMF Working Papers

Mind the Gap: City-Level Inflation Synchronization

By Serhan Cevik

September 2, 2022

Download PDF

Preview Citation

Format: Chicago

Serhan Cevik. Mind the Gap: City-Level Inflation Synchronization, (USA: International Monetary Fund, 2022) accessed September 18, 2024

Disclaimer: 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.

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:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2022/166

  • Stock No:

    WPIEA2022166

  • ISBN:

    9798400218613

  • ISSN:

    1018-5941