Inflation and income inequality: Relationship research in the regional aspect

Abstract

The paper examines the question of whether inflation and inequality are interrelated. The data panel formed based on Rosstat information. The econometric modeling methodology included the identification of separate panel regressions for the consumer price index (CPI) and the Gini coefficient, as well as equations systems for these indicators, including equations systems for food inflation, nonfood products and services, as well as quantiles of population distribution by income. A two-way positive relationship between the CPI for goods and services and the Gini coefficient by region was empirically obtained. However, the result is asymmetric and typical for the CPI for food products and for the fifth income quintile. For the CPI for non-food goods/services/the first quintile of the income distribution, the result changes to a negative two-way relationship. The obtained results allow taking into account the unequal income of the population when making decisions by the Bank of Russia on monetary policy, as well as emphasize the effectiveness of government measures to equalize income of the population in order to contain inflationary processes.