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Mr. Serhan Cevik
The post-pandemic rise in consumer prices across the world has renewed interest in inflation dynamics after decades of global disinflation. This paper provides a spatial investigation of inflation synchronicity at the city level in Lithuania using disaggregated monthly data during the period 2000–2021. The empirical analysis provides strong evidence that (i) the co-movement of city-level inflation rates—estimated using the instantaneous quasi-correlation approach—is significantly weaker than the extent of synchronization suggested by the simple correlation analysis; (ii) there is substantial heterogeneity in the instantaneous quasi-correlation of inflation subcomponents between city pairs; and (iii) there are significant changes in the degree of city-level synchronization over time, reflecting important economic developments in history such as the global financial crisis, the adoption of euro, and the COVID-19 pandemic.
Mr. Serhan Cevik

Morgan, Rime, and Strahan (2004) , Abiad et al . (2013 ), Duval et al . (2016 ), and Blagrave (2020) , this measure of inflation synchronization is defined as: Q C o r r e l c , j , t = ( π c , t − π c , t * ) * ( π j , t − π j , t * ) σ c * σ j where π c,t is the annual rate of inflation in city c at month t based on the headline CPI and its subcomponents as described in the previous section π c , t * a n d π j , t * denote an equilibrium level of consumer price inflation in city c and; at month t defined as the time-varying trend inflation

Mr. Serhan Cevik

Copyright Page © 2022 International Monetary Fund WP/22/166 IMF Working Paper European Department Mind the Gap: City-Level Inflation Synchronization Prepared by Serhan Cevik 1 Authorized for distribution by Alfredo Cuevas September 2022 IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. Abstract The

Mr. Serhan Cevik
The post-pandemic rise in consumer prices across the world has renewed interest in inflation dynamics after decades of global disinflation. This paper contributes to the literature by providing a granular investigation of inflation persistence at the city level in Lithuania during the period 2000–2021, as well as a comparison of inflation persistence at the country level vis-àvis the eurozone over the same period. Using disaggregate monthly data collected in five major cities, the empirical analysis finds a mixed and ambiguous picture of inflation persistence. While the headline inflation does not appear to exhibit a high degree of persistence, most consumption categories have significant persistence. As a result, shocks may not remain transitory and instead have persistent effects that could spillover across subcomponents depending on the size of the shock.
Mr. Serhan Cevik

. 2 Fuhrer and Moore (1995) and Fuhrer (2010) provide comprehensive overviews of inflation persistence. 3 The cities in the sample are Kaunas, Klaipeda, Panevezys, Siauliai, and Vilnius. 4 Cevik (2022) provides an empirical analysis of city-level inflation synchronization in Lithuania. 5 This paper does not execute a detailed set of structural break tests, as its objective is not to provide a definitive guidance on the precise timing of changes in inflation persistence. However, as shown in Figure 1 , there is some evidence of shifts

Eric Monnet and Mr. Damien Puy

report a rise in inflation synchronization. 6 The dataset will be made available on authors’ websites, along with a complete compilation guide and a comparison with other datasets. 7 Long historical comparisons based on quarterly data are almost exclusively focused on G7 countries ( Kose, Otrok and Whiteman (2008) , Doyle and Faust (2005) , Ha et al. (2017) ). Studies with a broader geographical focus are constrained to the post 90’s because of data constraints in EMs and smaller advanced economies (e.g. Miranda-Agrippino and Rey (2015) ). Our data

Eric Monnet and Mr. Damien Puy
We estimate world cycles using a new quarterly dataset of output, credit and asset prices assembled using IMF archives and covering a large set of advanced and emerging economies since 1950. World cycles, both real and financial, exist and are generally driven by US shocks. But their impact is modest for most countries. The global financial cycle is also much weaker when looking at credit rather than asset prices. We also challenge the view that syncronization has increased over time. Although this is true for prices (goods and assets), this not true for quantities (output and credit). The world business and credit cycles were as strong during Bretton Woods (1950–1972) as during the Globalization period (1984-2006). For most countries, the way their output co-moves with the rest of the world has changed little over the last 70 years. We discuss the reasons behind these new findings and their policy implications for small open economies.