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National Inflation and the Local Price Level: A Paradox

Niranjan Shetty and P Sreelakshmi

The IUP Journal of Managerial Economics, 2009, vol. VII, issue 2, 18-31

Abstract: Inflation is one of the periodic happenings, which very rarely captured the minds of the people and the media in the past. Fortunately, today, inflation has become the pivotal element of economic, political and social discussions in and around the globe. Inflation is gaining tremendous public attention as well as media coverage to its full extent. Not only that, very often, inflation is projected as ‘Everything’ of Economics. The latest IMF report (Press Release No. 08/219, September 24, 2008) says that 50 developing countries remain at risk in 2009 as a result of increase in food and fuel prices. Inflation, normally, has a general connotation. It is the mirror for general price level variations. This may not hold true for the fluctuations of prices of few commodities in local markets. When price movements are alarming at the national level, does it really reflect the local price changes? Do local people really benefit when the inflation is at its lowest point in the national level? There is every possibility that the local price level depends on several other factors independent of national factors. This paper makes an enquiry to elicit the price movements at national and local levels. It clearly states the extent to which the local price variations are accompanied by national inflation.

Date: 2009
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