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Do Prices Converge Among Indonesian Cities? An Empirical Analysis

Author

Listed:
  • Bhushan Praveen Jangam

    (Indian Institute of Technology)

  • Vaseem Akram

    (Indian Institute of Technology)

Abstract

We investigate consumer price convergence for 82 Indonesian cities using monthly data from 2014 to 2019. To do so, we employ recent techniques of club convergence and weak sigma convergence. The results reveal, first, consumer price divergence, implying price rigidities across the cities. Second, we find four clubs, suggesting that Indonesian cities converge along four unique transition paths. Third, we find weak evidence of consumer price convergence, suggesting that prices among Indonesian cities adjust, but not freely. Policy should therefore consider unique convergence paths for each club to promote stronger consumer price convergence.

Suggested Citation

  • Bhushan Praveen Jangam & Vaseem Akram, 2019. "Do Prices Converge Among Indonesian Cities? An Empirical Analysis," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(3), pages 1-24.
    • Handle: RePEc:idn:journl:v:22:y:2019:i:3a:p:1-24
    DOI: https://doi.org/10.21098/bemp.v22i3.1152
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    Citations

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    Cited by:

    1. Harry Aginta & Masakazu Someya, 2022. "Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-25, December.
    2. Vaseem Akram & Jabir Ali, 2021. "Output convergence at sector level across Indian states: Evidence from weak sigma and club convergence analysis," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(7), pages 1166-1188, October.
    3. Yazgan, M. Ege & Yilmazkuday, Hakan, 2011. "Price-level convergence: New evidence from U.S. cities," Economics Letters, Elsevier, vol. 110(2), pages 76-78, February.
    4. Rath, Badri Narayan & Panda, Bibhudutta & Akram, Vaseem, 2023. "Convergence and determinants of ICT development in case of emerging market economies," Telecommunications Policy, Elsevier, vol. 47(2).
    5. Domingo Rodríguez Benavides & Miguel Ángel Mendoza González & Jose Antonio Climent Hernández, 2022. "La hipótesis de convergencia en México: un enfoque de sigma-convergencia débil," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 17(2), pages 1-21, Abril - J.
    6. 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.
    7. Paresh Kumar Narayan, 2019. "Understanding Indonesia’S City-Level Consumer Price Formation: Implications For Price Stability," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(4), pages 405-422.
    8. Rodríguez Benavides, Domingo & Mendoza González, Miguel Ángel & Muller Durán, Nancy Ivonne, 2022. "Convergencia regional sigma débil en México: 1970-2019," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 54, pages 29-49.

    More about this item

    Keywords

    Club convergence; Weak sigma convergence; Price convergence; Indonesian cities;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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