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Regional inflation dynamics using space–time models

Helena Marques, Gabriel Pino Saldías and Juan Dios Tena Horrillo ()

Empirical Economics, 2014, vol. 47, issue 3, 1147-1172

Abstract: This article provides empirical evidence of the role of spatial factors on the determination of inflation dynamics for a representative set of tradable commodities in Chile. We present a simple model that explains inflation divergence across regions in a monetary union with similar preferences as a consequence of the geographical allocation of producers in the different regions. Our results indicate that spatial allocation together with transport costs are important determinants of regional inflation, while macroeconomic common factors do not play an important role in this process. Existing literature had obtained the opposite result for Europe, and the reasons for this difference warrant further investigation. Moreover, we find that geographical distance seems to be a more appropriate measure of neighbourhood than the adjacency of regions. Our results are robust to different specifications, regression methods and product groupings. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Regional inflation dynamics; Space–time models; Common factors; Chile; E31; E52; E58; R11; C23; C21 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Regional inflation dynamics using space-time models (2009) Downloads
Working Paper: Regional inflation dynamics using space-time models (2009) Downloads
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DOI: 10.1007/s00181-013-0763-9

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