This paper provides an estimate of the measurement bias in the Harmonised Index of Consumer Prices (HICP) that the European Central Bank uses to define price stability in the euro area. The estimate is based on a comparison of the rate of increase in consumer prices as measured by the HICP and the responses to a question about recent changes in the cost of living on the European Commission’s monthly Harmonised Consumer Survey (HCS). I find that the HICP may overstate the true rate of inflation by about 1.0 to 1.5 percentage points a year.
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Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number
05-09.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Mark Bils & Peter J. Klenow, 2001.
"Quantifying Quality Growth,"
American Economic Review,
American Economic Association, vol. 91(4), pages 1006-1030, September.
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