Rural and Urban price inflation components in Nigeria: Persistence, Connectedness and Spillovers

Olaoluwa Yaya, Hammed Abiola Olayinka, Aliu A Adebiyi, Ngozi Victor Atoi, Mercy U. Olugu and Wasiu B. Akinkunmi

MPRA Paper from University Library of Munich, Germany

Abstract: We checked against the law of one price between urban and rural consumer price indices of goods and services in Nigeria, using data that span January 1995 to April 2024. By first testing for persistence in price indices, we found a similar pattern of persistence that is non-mean reverting in all the CPI components except in Communication and Education where mean reversions are possible in the urban and rural areas. Communication and Restaurants & Hotels are major net inflation transmitters in both urban price region and rural price regions, while Clothing & footwear, and Furnishings & Household equipment maintenance also have minor roles to play in this regard at both price regions. Food & Non-alcoholic beverages; and Alcoholic beverages, tobacco & kola; transportation; Recreation and culture; and Miscellaneous goods and services are major net inflation shock receivers. We found Housing, water, electricity, gas and other fuel; Health; and Education to have different inflation shock transmitting roles for both urban and rural areas. Pricing at urban and rural areas are in tandem, thus policies that could further close the price gaps such as urbanisation and good road systems should be enacted.

Keywords: CPI inflation; Nigeria; Urban-rural price differentials (search for similar items in EconPapers)
JEL-codes: C2 C22 R11 (search for similar items in EconPapers)
Date: 2024-09-26
New Economics Papers: this item is included in nep-mon and nep-ure
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