Inflation Targeting and Regional Inflation Persistence: Evidence from Korea

Peter Tillmann

No 201122, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: The adoption of a credible monetary policy regime such as inflation targeting is known to reduce the persistence of inflation fluctuations. This conclusion, however, is derived from aggregate inflation or sectoral inflation rates, not from regional inflation data. This paper studies the regional dimension of inflation targeting, i.e. the consequences of inflation targeting for regional inflation persistence. Based on data for Korean cities and provinces it is shown that the adoption of inflation targeting leads (i) to a fall in inflation persistence at the regional level and (ii) to a reduction in the cross-regional heterogeneity in inflation persistence. A common factor model lends further support to the role of the common component, and hence monetary policy, for regional inflation persistence.

Keywords: inflation targeting; inflation persistence; monetary policy regime; regional inflation; factor model (search for similar items in EconPapers)
JEL-codes: E31 E52 R11 (search for similar items in EconPapers)
Pages: 24pages
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-geo, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Journal Article: Inflation Targeting and Regional Inflation Persistence: Evidence from Korea (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201122

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