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Patterns of regional inflation persistence in a CEE country. The case of Poland

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  • Pawe³ Gajewski

    (Department of Macroeconomics, Institute of Economics, University of Lodz)

Abstract

This paper investigates patterns of regional inflation persistence in Poland, a representative CEE country. We first argue that the CEE perspective is relevant in the context of this study due to the recent transitions, incomplete processes of forming forward-looking inflation expectations and pronounced spatial inequalities. Using individual and panel regressions on disaggregate data we provide evidence of the aggregation bias and marked differences in inflation persistence across product categories. Furthermore, we show that cross-regional differences in inflation persistence remain, even after controlling for the product category. While we generally confirm the earlier finding of Vaona and Ascari (2012) that more backward regions exhibit higher CPI inflation persistence, we also show that the picture is more nuanced at the product category level.

Suggested Citation

  • Pawe³ Gajewski, 2017. "Patterns of regional inflation persistence in a CEE country. The case of Poland," Lodz Economics Working Papers 5/2017, University of Lodz, Faculty of Economics and Sociology.
    • Handle: RePEc:ann:wpaper:5/2017
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    References listed on IDEAS

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    1. Jeff Fuhrer & George Moore, 1995. "Inflation Persistence," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 127-159.
    2. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
    3. Fuhrer, Jeffrey C., 2010. "Inflation Persistence," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 9, pages 423-486, Elsevier.
    4. Maciej Smętkowski, 2013. "Regional Disparities in Central and Eastern European Countries: Trends, Drivers and Prospects," Europe-Asia Studies, Taylor & Francis Journals, vol. 65(8), pages 1529-1554, October.
    5. Mojon, Benoît & Altissimo, Filippo & Zaffaroni, Paolo, 2007. "Fast micro and slow macro: can aggregation explain the persistence of inflation?," Working Paper Series 729, European Central Bank.
    6. Stephen G. Cecchetti & Guy Debelle, 2006. "Has the inflation process changed? [‘Did the underlying behaviour of inflation change in the 1980s? A study of 22 countries,’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(46), pages 312-352.
    7. Paweł Gajewski & Grzegorz Tchorek, 2017. "What drives export performance of firms in Eastern and Western Poland?," European Planning Studies, Taylor & Francis Journals, vol. 25(12), pages 2250-2271, December.
    8. Ricardo Sousa & James Yetman, 2016. "Inflation expectations and monetary policy," BIS Papers chapters, in: Bank for International Settlements (ed.), Inflation mechanisms, expectations and monetary policy, volume 89, pages 41-67, Bank for International Settlements.
    9. Philip Arestis & Kostas Mouratidis, 2005. "Credibility of monetary policy in four accession countries: a Markov regime-switching approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 81-89.
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    Cited by:

    1. Abuselidze, George, 2018. "Modern Challenges of Monetary Policy Strategies: Inflation and Devaluation Influence on Economic Development of the Country," MPRA Paper 99885, University Library of Munich, Germany, revised 26 Jan 2019.
    2. Hasan Engin Duran & Burak Dindaroğlu, 2021. "Regional inflation persistence in Turkey," Growth and Change, Wiley Blackwell, vol. 52(1), pages 460-491, March.

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    Keywords

    Regional economic dynamics; CEE; inflation persistence;
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