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Measuring Inflation During the Pandemic with the Benefit of Hindsight

Author

Listed:
  • Aftab Chowdhury

    (Cardiff University
    University of Dhaka)

  • Huw Dixon

    (Cardiff University)

Abstract

This study has adopted the actual household expenditure data from the national accounts to construct a true inflation rate (using the Fisher index) and found that the official inflation rate in the 33 OECD countries was an overestimate of true inflation for 23 and underestimate in 10 countries in the first wave of the COVID-19 pandemic. The result obtained for the countries where true inflation was higher than the official rate in this study matches the results obtained by Cavallo (Inflation with covid consumption baskets, 2020) and Reinsdorf (COVID-19 and the CPI: Is inflation underestimated?, 2020). However, a significant difference has been detected for the countries where the official inflation exceeds the true measure in this study. The core reason behind the discrepancies is in the use of appropriate expenditure weights. This suggests caution in using credit-card based expenditure data when spending behaviour has changed dramatically.

Suggested Citation

  • Aftab Chowdhury & Huw Dixon, 2025. "Measuring Inflation During the Pandemic with the Benefit of Hindsight," Open Economies Review, Springer, vol. 36(2), pages 679-704, April.
    • Handle: RePEc:kap:openec:v:36:y:2025:i:2:d:10.1007_s11079-024-09776-3
    DOI: 10.1007/s11079-024-09776-3
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    References listed on IDEAS

    as
    1. Scott R Baker & Robert A Farrokhnia & Steffen Meyer & Michaela Pagel & Constantine Yannelis & Jeffrey Pontiff, 0. "How Does Household Spending Respond to an Epidemic? Consumption during the 2020 COVID-19 Pandemic," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(4), pages 834-862.
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    6. Huw Dixon, 2020. "The Measurement of Inflation During the Lockdown: A Trial Calculation," National Institute of Economic and Social Research (NIESR) Policy Papers 16, National Institute of Economic and Social Research.
    7. Pascal Seiler, 2020. "Weighting bias and inflation in the time of COVID-19: evidence from Swiss transaction data," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-11, December.
    8. Mr. Marshall B Reinsdorf, 2020. "COVID-19 and the CPI: Is Inflation Underestimated?," IMF Working Papers 2020/224, International Monetary Fund.
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    Keywords

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • I10 - Health, Education, and Welfare - - Health - - - General

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