Breaking Bad: A Disaggregated Analysis of Inflation Inertia

Serhan Cevik

No 2022/167, IMF Working Papers from International Monetary Fund

Abstract: The post-pandemic rise in consumer prices across the world has renewed interest in inflation dynamics after decades of global disinflation. This paper contributes to the literature by providing a granular investigation of inflation persistence at the city level in Lithuania during the period 2000–2021, as well as a comparison of inflation persistence at the country level vis-àvis the eurozone over the same period. Using disaggregate monthly data collected in five major cities, the empirical analysis finds a mixed and ambiguous picture of inflation persistence. While the headline inflation does not appear to exhibit a high degree of persistence, most consumption categories have significant persistence. As a result, shocks may not remain transitory and instead have persistent effects that could spillover across subcomponents depending on the size of the shock.

Keywords: inflation inertia; consumption category; inflation dynamics; consumer price inflation; inflation expectation; Inflation; Inflation persistence; Consumer price indexes; Consumer prices; Global financial crisis of 2008-2009; Global (search for similar items in EconPapers)
Pages: 15
Date: 2022-09-02
New Economics Papers: this item is included in nep-eec, nep-mon and nep-tra
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Journal Article: Breaking Bad: A Disaggregated Analysis of Inflation Inertia (2023)
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