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Inflation Targeting and Regional Inflation Persistence: Evidence from Korea

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  • Peter Tillmann

    (University of Giessen)

Abstract

The adoption of a credible monetary policy regime such as inflation targeting is known to reduce the persistence of inflation fluctuations. This conclusion, however, is derived from aggregate inflation or sectoral inflation rates, not from regional inflation data. This paper studies the regional dimension of inflation targeting, i.e. the consequences of inflation targeting for regional inflation persistence. Based on data for Korean cities and provinces it is shown that the adoption of inflation targeting leads (i) to a fall in inflation persistence at the regional level and (ii) to a reduction in the cross-regional heterogeneity in inflation persistence. A common factor model lends further support to the role of the common component, and hence monetary policy, for regional inflation persistence.

Suggested Citation

  • Peter Tillmann, 2011. "Inflation Targeting and Regional Inflation Persistence: Evidence from Korea," MAGKS Papers on Economics 201122, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201122
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    Cited by:

    1. Nagayasu, Jun, 2014. "Regional inflation, spatial location and the Balassa-Samuelson effect," MPRA Paper 59220, University Library of Munich, Germany.
    2. Dawber James & Smith Paul A. & Tzavidis Nikos & Würz Nora & Flower Tanya & Thomas Heledd & Schmid Timo, 2022. "Experimental UK Regional Consumer Price Inflation with Model-Based Expenditure Weights," Journal of Official Statistics, Sciendo, vol. 38(1), pages 213-237, March.
    3. Peter Tillmann, 2013. "Inflation Targeting and Regional Inflation Persistence: Evidence from Korea," Pacific Economic Review, Wiley Blackwell, vol. 18(2), pages 147-161, May.
    4. Jun Nagayasu, 2017. "Regional inflation, spatial locations and the Balassa-Samuelson effect: Evidence from Japan," Urban Studies, Urban Studies Journal Limited, vol. 54(6), pages 1482-1499, May.
    5. Chi-Young Choi & Joo Yong Lee & Róisín O'Sullivan, 2015. "Monetary Policy Regime Change and Regional Inflation Dynamics: Looking through the Lens of Sector-Level Data for Korea," Working Papers 2015-20, Economic Research Institute, Bank of Korea.

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    More about this item

    Keywords

    inflation targeting; inflation persistence; monetary policy regime; regional inflation; factor model;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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