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Regional inflation, spatial location and the Balassa-Samuelson effect

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  • Nagayasu, Jun

Abstract

We empirically analyze regional inflation using data from Japan where there is no regulation to impede the free movement of labor, capitals, goods and services across regions. In particular, our analysis will focus on the geographical location of regions and the productivity effect as explanation for the dynamics of regional inflation. Technically, given that home inflation is often affected by that of neighbors, spatial models have been employed in order to explicitly capture this spillover effect. Similarly, the productivity spillover is modelled in the specification. Then we find that both spatial location and productivity are important determinants of regional inflation. Furthermore inflation persistence is reported to play an important role in explaining regional data.

Suggested Citation

  • Nagayasu, Jun, 2014. "Regional inflation, spatial location and the Balassa-Samuelson effect," MPRA Paper 59220, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:59220
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    File URL: https://mpra.ub.uni-muenchen.de/59220/1/MPRA_paper_59220.pdf
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    Cited by:

    1. Ayse Kabukcuoglu & Enrique Martínez-García, 2015. "Inflation as a Global Phenomenon—Some Implications for Policy Analysis and Forecasting," Koç University-TUSIAD Economic Research Forum Working Papers 1520, Koc University-TUSIAD Economic Research Forum.

    More about this item

    Keywords

    Regional inflation; Balassa-Samuelson effect; transaction costs; spatial econometric models;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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