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Inflation Perception and Anticipation Gaps in the Eurozone

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Author Info

  • Svatopluk Kapounek

    ()
    (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)

  • Lubor Lacina

    ()
    (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)

Abstract

There is significant empirical evidence that the introduction of the euro led to a significant increase of perceived inflation in most countries. Such an increase and persistence in the perceived inflation might then have an impact on inflation expectations and other macroeconomic variables. The authors have used the short-term Phillips curve to describe the difference between inflation expectations and its current values, subsequently to identify the impact of this difference on other economic indicators. The paper is structured as follows: Section 1 provides an overview of the theory and empiricism on the gap between measured and perceived inflation. Section 2 then builds up the theoretical framework based on the short-term Phillips curve approach and derives two hypotheses, to be tested subsequently. Section 3 provides the methodology. Section 4 presents the modelling and results of the empirical analysis. In section 5 authors compare its results and used methodology with papers and studies on a similar topic. Finally, Section 6 concludes and provides recommendations for the economic policy.

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File URL: ftp://ftp.mendelu.cz/RePEc/men/wpaper/05_2011.pdf
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Bibliographic Info

Paper provided by Mendel University in Brno, Faculty of Business and Economics in its series MENDELU Working Papers in Business and Economics with number 2011-05.

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Length: 21
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:men:wpaper:05_2011

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Related research

Keywords: monetary integration; perceived and anticipated inflation; adaptive and rational expectations hypothesis; expectations-augmented Phillips curve; stationarity; ADF test;

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