Divergences in rural, urban inflation do not persist for long: RBI paper
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Last Updated: Dec 27, 2020, 11:45 AM IST
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Synopsis
Empirical estimates, it said, revealed that the differentials between rural and urban inflation are transient and both exhibit a long-run equilibrium relationship, with a significant error correction in the short-run.
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Rural-urban inflation divergence does not persist in the long run and converges over time, and both exhibit a long-term equilibrium relationship, said an RBI article. This convergence of rural-urban inflation supports the relevance of one inflation target as nominal anchor at the national level, said the article prepared by Binod B. Bhoi, Himani Shekhar and Ipsita Padhi, Department of Economic and Policy Research, RBI.