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Price variability and price convergence: Evidence from Indonesia

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  • Wimanda, Rizki E.

Abstract

This paper evaluates price variability and price convergence in Indonesia. Using price indices of 35 products in 45 cities from January 2002 to April 2008, this study shows that, during the observed period, prices in Indonesia converged to the 'relative' law of one price. The price variability of one product across cities is found to be smaller than the price variability of all products within a city. Transportation costs and the level of development matter to price variability. This study also reveals that the average speed of convergence, which is measured by the half-life, for perishable goods is about 9 months, non-perishable goods 32-36 months, and services 18-19 months, while the median of the half-life of all products is about 16-17 months. The speed of convergence depends on the initial price difference, but not the distance between cities.

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  • Wimanda, Rizki E., 2009. "Price variability and price convergence: Evidence from Indonesia," Journal of Asian Economics, Elsevier, vol. 20(4), pages 427-442, September.
    • Handle: RePEc:eee:asieco:v:20:y:2009:i:4:p:427-442
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    Cited by:

    1. Saileshsingh Gunessee & Cheng Zhang, 2022. "The economics of domestic market integration," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1069-1095, September.
    2. Harry Aginta, 2022. "Spatiotemporal analysis of regional inflation in an emerging country: The case of Indonesia," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(3), pages 667-688, June.
    3. M. Ege Yazgan & Hakan Yilmazkuday, 2016. "High versus low inflation: implications for price-level convergence," Empirical Economics, Springer, vol. 50(4), pages 1527-1563, June.
    4. Mustafa Çakır, 2023. "Regional inflation spillovers in Turkey," Economic Change and Restructuring, Springer, vol. 56(2), pages 959-980, April.
    5. Harry Aginta, 2021. "Spatial dynamics of consumer price in Indonesia: convergence clubs and conditioning factors," Asia-Pacific Journal of Regional Science, Springer, vol. 5(2), pages 427-451, June.
    6. Samuel Bazzi, 2017. "Wealth Heterogeneity and the Income Elasticity of Migration," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 219-255, April.

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