Advanced Search
MyIDEAS: Login

How to defi ne the Consumer Perceived Price Index? The case of Poland

Contents:

Author Info

Abstract

Inflation perceived by consumers may differ from official statistics particularly due to different baskets of goods and services lay people and statisticians consider and by consumer loss aversion to price increases. Such effects, as suggested by the Prospect Theory, are confirmed in many empirical studies, showing that consumers are substantially influenced by prices of frequent purchases and that price increases are perceived more strongly than price decreases. Following those observations, particularly useful in interpreting a jump of inflation perception in some of the EMU economies after the euro introduction, an alternative price index, i.e. the Index of Perceived Inflation, was proposed by Brachinger (2006) and Brachinger (2008). The role of price changes of frequently bought goods and services in determining consumer opinions on price changes was also significant in Poland, especially after its accession to the EU. To assess whether this effect is of a systematic nature, in this paper we develop different indices of price changes of frequently bought goods and services in Poland, including the Index of Perceived Inflation. Then we evaluate these indices vs. CPI inflation in terms of their impact on consumer inflation perception, as proxied with survey data. The results suggest that Polish consumers observe a relatively wide range of goods and services and that both factors suggested by the Prospect Theory seem to influence their opinions on evolution of prices in the past. Having the measure of perceived inflation – i.e. the Consumer Perceived Price Index (CPPI) – that seems more adequate than current CPI inflation on the one hand and survey-based measures of perceived inflation scaled with respect to the trend of CPI inflation on the other hand, we use it as a scaling factor to derive a probability measure of consumer inflation expectations in Poland. Then we compare forecasting accuracy of this measure with respective results based on the measure of consumer inflation expectations quantified in a standard manner.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nbp.pl/publikacje/materialy_i_studia/160_en.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bank of Poland, Economic Institute in its series National Bank of Poland Working Papers with number 160.

as in new window
Length: 27
Date of creation: 2013
Date of revision:
Handle: RePEc:nbp:nbpmis:160

Contact details of provider:
Postal: 00-919 Warszawa ul. Świętokrzyska 11/21
Phone: (0-22) 653 10 00
Fax: (0-22) 620 85 18
Web page: http://www.nbp.pl/Homen.aspx?f=en/publikacje/materialy_i_studia/informacja_en.html
More information through EDIRC

Related research

Keywords: Inflation; inflation perceptions; inflation expectations; survey; consumers.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbp:nbpmis:160. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ewa Szymecka).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.