“Real-Feel” Inflation: Quantitative Estimation of Inflation Perceptions

Michael J Ashton

Business Economics, 2012, vol. 47, issue 1, 14-26

Abstract: Inflation expectations are believed to influence actual inflation and therefore policymaker actions. However, methods usually employed to evaluate inflation expectations are insufficient. Survey methods either record economists’ forecasts of the official Consumer Price Index (CPI) (which isn’t what policymakers need to know) or consumers’ attempts to calculate their own inflation experience. Consumers have little chance to perform the calculations needed to accurately compute inflation. I propose functional forms to substitute for the heuristics consumers actually use to form inflation perceptions. I also propose adjustments to reconcile official price measurements with consumers’ perceptions. These adjustments are corrections for cognitive biases related to loss aversion and mental accounting.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.palgrave-journals.com/be/journal/v47/n1/pdf/be201135a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/be/journal/v47/n1/full/be201135a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:buseco:v:47:y:2012:i:1:p:14-26

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11369

Access Statistics for this article

Business Economics is currently edited by Charles Steindel

More articles in Business Economics from Palgrave Macmillan, National Association for Business Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().