A Tale of Two Cities: Australian Evidence on the Effects of Lockdown on Grocery Inflation

Despite extensive research on the economic implications of COVID-19, the inflationary consequences of lockdown remain underexplored. Prior impact assessments may be compromised due to the cross-jurisdictional presence of lockdowns and the prevalence of the coronavirus. This study leverages a unique circumstance in Australia, where Melbourne was the only city under lockdown, to discern the impact of lockdown. By analysing granular supermarket price data and adjusting for intertemporal and geographical variation in COVID-19 cases, policy stringency, and product availability, the study identifies a statistically significant and economically meaningful disinflationary effect on grocery prices attributable to lockdown. Excluding the specific disinflationary effect of lockdown, COVID-19-related stringency measures have a minimal impact on the prices of typical consumables such as food.