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The Behaviour of Consumer Prices Across Provinces

Author

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  • Gordon Wilkinson

Abstract

Measures of core inflation enable a central bank to distinguish price movements that are transitory and generated by non-monetary events from those that are more permanent and related to prior monetary policy decisions. The author uses standard statistical measures to assess the behaviour of consumer prices across provinces and identify price components with more divergent price patterns. The results indicate that energy, shelter and tobacco prices are the most volatile across provinces. Very large price movements restricted to one or a few provinces suggest that the forces or events triggering those movements may be province specific and unrelated to national demand pressures. Such results suggest that constructing a type of core inflation measure called the “trimmed mean” that excludes components with exceptionally large price changes at the provincial level may offer an alternative means of assessing underlying inflationary pressures.

Suggested Citation

  • Gordon Wilkinson, 2011. "The Behaviour of Consumer Prices Across Provinces," Discussion Papers 11-2, Bank of Canada.
  • Handle: RePEc:bca:bocadp:11-2
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    References listed on IDEAS

    as
    1. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
    2. Benati, Luca, 2008. "Investigating inflation persistence across monetary regimes," Working Paper Series 851, European Central Bank.
    3. Luca Benati, 2008. "Investigating Inflation Persistence Across Monetary Regimes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(3), pages 1005-1060.
    4. Hogan, Seamus & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports 89, Bank of Canada.
    5. Joanne Cutler, 2001. "Core Inflation in the UK," Discussion Papers 03, Monetary Policy Committee Unit, Bank of England.
    6. Christopher Ragan, 2006. "Why Monetary Policy Matters: A Canadian Perspective," Bank of Canada Review, Bank of Canada, vol. 2006(Winter), pages 19-25.
    7. Svensson, Lars E. O., 1999. "Price Stability as a Target for Monetary Policy: Defining and Maintaining Price Stability," Working Paper Series 91, Sveriges Riksbank (Central Bank of Sweden).
    8. David Archer, 1993. "Relative prices, inflation, the terms of trade and the Policy Targets Agreement," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, December.
    9. Ajit Dayanandan & Mukesh Ralhan, 2005. "Price Index Convergence Among Provinces and Cities of Canada: 1978 - 2001," Econometrics Working Papers 0504, Department of Economics, University of Victoria.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Inflation and prices;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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