Regional Inflation Persistence: Evidence from Italy

Regional patterns of inflation persistence have received attention only at a very coarse level of territorial disaggregation, that of EMU member states. However economic disparities within EMU member states are an equally important policy issue. This paper considers a country with a large regional divide, i.e., Italy, at a fine level of territorial disaggregation (NUTS3). Our results show that economically backward regions display greater inflation persistence. Moreover, we show that higher persistence is linked to a lower degree of competitiveness in the retail sector. Finally, the inflation persistence at the national level does not present any geographical aggregation bias, because it equals the mean of inflation persistence of provincial data.