Rural and Urban price inflation components in Nigeria: Persistence, Connectedness and Spillovers

Yaya, OlaOluwa S. and Olayinka, Hammed Abiola and Adebiyi, Aliu A and Atoi, Ngozi Victor and Olugu, Mercy U. and Akinkunmi, Wasiu B. (2024): Rural and Urban price inflation components in Nigeria: Persistence, Connectedness and Spillovers.

Abstract

We checked against the law of one price between urban and rural consumer price indices of goods and services in Nigeria, using data that span January 1995 to April 2024. By first testing for persistence in price indices, we found a similar pattern of persistence that is non-mean reverting in all the CPI components except in Communication and Education where mean reversions are possible in the urban and rural areas. Communication and Restaurants & Hotels are major net inflation transmitters in both urban price region and rural price regions, while Clothing & footwear, and Furnishings & Household equipment maintenance also have minor roles to play in this regard at both price regions. Food & Non-alcoholic beverages; and Alcoholic beverages, tobacco & kola; transportation; Recreation and culture; and Miscellaneous goods and services are major net inflation shock receivers. We found Housing, water, electricity, gas and other fuel; Health; and Education to have different inflation shock transmitting roles for both urban and rural areas. Pricing at urban and rural areas are in tandem, thus policies that could further close the price gaps such as urbanisation and good road systems should be enacted.

• Item Type: MPRA Paper
• Language: English
• Keywords: CPI inflation, Nigeria, Urban-rural price differentials
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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