Mind the gap: city-level inflation synchronization

Serhan Cevik

International Review of Economics, 2023, vol. 70, issue 1, No 6, 139 pages

Abstract: Abstract The post-pandemic rise in consumer prices across the world has renewed interest in inflation dynamics after decades of global disinflation. This paper provides a spatial investigation of inflation synchronicity at the city level in Lithuania using disaggregated monthly data during the period 2000–2021. The empirical analysis provides strong evidence that (i) the co-movement of city-level inflation rates—estimated using the instantaneous quasi-correlation approach—is significantly weaker than the extent of synchronization suggested by the simple correlation analysis; (ii) there is substantial heterogeneity in the instantaneous quasi-correlation of inflation subcomponents between city pairs; and (iii) there are significant changes in the degree of city-level synchronization over time, reflecting important economic developments in history such as the global financial crisis, the adoption of euro, and the COVID-19 pandemic.

Keywords: Inflation synchronization; Subnational; Transition economies; Lithuania (search for similar items in EconPapers)
JEL-codes: C13 C21 C22 E31 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s12232-023-00412-z

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