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Title:Inflation targeting and regional inflation persistence: Evidence from Korea PDF Logo
Authors:Tillmann, Peter
Issue Date:2011
Series/Report no.:Joint discussion paper series in economics 22-2011
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.
Subjects:inflation targeting
inflation persistence
monetary policy regime
regional inflation
factor model
JEL:E31
E52
R11
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

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