Abstract
Price convergence, both between and within economies, has been a central topic in modern regional economic analyses. This study re-investigates regional price convergence across 34 provinces in Indonesia by using monthly CPI data from January 2012 to December 2019. Utilizing advanced tool in convergence analysis, our results show that general consumer prices do not converge into a single common equilibrium. Rather, there are four convergence clubs identified. Then, we found that labor productivity, inflation exepectations, consumption growth, and spatial externalities influence the convergence clubs formation. From a policy perspective, our findings of multiple convergence clubs and their influencing factors alert policy makers to re-think the possibility to augment uniform monetary policy with region-specific inflation management measures.
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