Do Households Misperceive the Price Level? Some Evidence from Survey Data

James Hvidding
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James Hvidding: Kutztown University

Eastern Economic Journal, 1991, vol. 17, issue 1, 72-74

Abstract: It has been widely held that nominal disturbances influence real economic activity by distorting the public's perception of relative prices. Implicit in this hypothesis is the assumption that there is a lag in the public's perception of the aggregate price level. This paper tests this assumption using the Michigan Survey data on inflation expectations. The econometric results refute the hypothesis that the public is ignorant of the current price level and fail to refute the hypothesis that the public is fully aware of the current consumer price index. There is no evidence of a perception lag in these data.

Keywords: Households; Inflation; Price Level; Prices (search for similar items in EconPapers)
JEL-codes: D12 E31 (search for similar items in EconPapers)
Date: 1991
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