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How is perceived inflation related to actual price changes in the European Union?

  • Antonides, Gerrit

We analyze for which types of consumer expenditures the rate of price change influences consumer perception of inflation. We use both harmonized consumer price indices (HCPI) and series of perceived inflation from Eurostat in the 1996-2006 time period for 13 European countries. After removing substantial autocorrelation, we found a significant effect of the rate of overall price change on perceived inflation in the EU as a whole and a number of individual countries, supporting Fechner's law. However, in different countries different consumer item categories were correlated with perceived inflation.

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File URL: http://www.sciencedirect.com/science/article/B6V8H-4S92TGR-1/2/29a365ccb2bd458177ea3cbbd7c2b229
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Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 29 (2008)
Issue (Month): 4 (August)
Pages: 417-432

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Handle: RePEc:eee:joepsy:v:29:y:2008:i:4:p:417-432
Contact details of provider: Web page: http://www.elsevier.com/locate/joep

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  1. Johannes Hoffmann & Hans-Albert Leifer & Andreas Lorenz, 2006. "Index of Perceived Inflation or EU Consumer Surveys?," Intereconomics: Review of European Economic Policy, Springer, vol. 41(3), pages 142-150, May.
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  3. Gurumurthy Kalyanaram & Russell S. Winer, 1995. "Empirical Generalizations from Reference Price Research," Marketing Science, INFORMS, vol. 14(3_supplem), pages G161-G169.
  4. Bates, John M. & Gabor, Andre, 1986. "Price perception in creeping inflation: Report on an enquiry," Journal of Economic Psychology, Elsevier, vol. 7(3), pages 291-314, September.
  5. Kemp, Simon, 1991. "Remembering and dating past prices," Journal of Economic Psychology, Elsevier, vol. 12(3), pages 431-445, September.
  6. Briesch, Richard A, et al, 1997. " A Comparative Analysis of Reference Price Models," Journal of Consumer Research, University of Chicago Press, vol. 24(2), pages 202-14, September.
  7. Manfred Fluch & Helmut Stix, 2005. "Perceived Inflation in Austria – Extent, Explanations, Effects," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 22–47.
  8. Kemp, Simon, 1987. "Estimation of past prices," Journal of Economic Psychology, Elsevier, vol. 8(2), pages 181-189, June.
  9. Bolton, Lisa E & Warlop, Luk & Alba, Joseph W, 2003. " Consumer Perceptions of Price (Un)Fairness," Journal of Consumer Research, University of Chicago Press, vol. 29(4), pages 474-91, March.
  10. Wioletta Dziuda & Giovanni Mastrobuoni, 2009. "The Euro Changeover and Its Effects on Price Transparency and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 101-129, 02.
  11. Ranyard, Rob & Missier, Fabio Del & Bonini, Nicolao & Duxbury, Darren & Summers, Barbara, 2008. "Perceptions and expectations of price changes and inflation: A review and conceptual framework," Journal of Economic Psychology, Elsevier, vol. 29(4), pages 378-400, August.
  12. Batchelor, R. A., 1986. "The psychophysics of inflation," Journal of Economic Psychology, Elsevier, vol. 7(3), pages 269-290, September.
  13. Janiszewski, Chris & Lichtenstein, Donald R, 1999. " A Range Theory Account of Price Perception," Journal of Consumer Research, University of Chicago Press, vol. 25(4), pages 353-68, March.
  14. Jonung, Lars, 1986. "Uncertainty about inflationary perceptions and expectations," Journal of Economic Psychology, Elsevier, vol. 7(3), pages 315-325, September.
  15. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  16. Gärling, Tommy & Gamble, Amelie, 2008. "Perceived inflation and expected future prices in different currencies," Journal of Economic Psychology, Elsevier, vol. 29(4), pages 401-416, August.
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