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Consumers' Opinion of Inflation Bias Due to Quality Improvements

Author

Listed:
  • Jan Hanousek

    () (CERGFE-EI)

  • Randall K. Filer

    () (Hunter College & CUNY Graduate Center & CERGE-EI)

Abstract

Measurement of quality changes has proven to be an especially difficult aspect of calculating unbiased rates of inflation. We propose a new methodology of capturing quality improvements based on consumer focus groups and apply this methodology in an environment where quality changes might be expected to be especially rapid and extensive, a post-communist transition economy. We find that the methodology is practical and that it indicates a substantial understatement of quality improvements during transition, and, therefore, a substantial overstatement of inflation resulting in a serious downward bias in growth rate estimates for post-communist economies. The move to free markets has apparently improved consumers' welfare more by improving what they can purchase than by increasing how much they can purchase.

Suggested Citation

  • Jan Hanousek & Randall K. Filer, 2002. "Consumers' Opinion of Inflation Bias Due to Quality Improvements," Economics Working Paper Archive at Hunter College 02/8, Hunter College Department of Economics.
  • Handle: RePEc:htr:hcecon:02/8
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    References listed on IDEAS

    as
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    Cited by:

    1. Marius Gavriletea, 2008. "The Effects Of Terrorism On The Insurance Sector," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    2. Bruha, Jan & Podpiera, Jirí & Polák, Stanislav, 2010. "The convergence dynamics of a transition economy: The case of the Czech Republic," Economic Modelling, Elsevier, vol. 27(1), pages 116-124, January.
    3. Jan Babecký & Fabrizio Coricelli & Roman Horváth, 2009. "Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(2), pages 102-127, June.
    4. Esmaeel Ezat, 2008. "The Impact Of Foreign Direct Investment (Fdi) On Domestic Firm'S Product And Service Quality In Czech Republic," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    5. Carmen Maria Gut, 2008. "Participation To Professional Training Courses Of The Employees Belonging To Companies From The Romanian Manufacturing Industry," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    6. Jan Bruha & Jiri Podpiera & Stanislav Polak, 2007. "The Convergence of a Transition Economy: The Case of the Czech Republic," Working Papers 2007/3, Czech National Bank, Research Department.
    7. Ashoka Mody & Franziska L Ohnsorge, 2007. "Can Domestic Policies Influence Inflation?," IMF Working Papers 07/257, International Monetary Fund.
    8. Jos J. Van Der Werf, 2008. "Would-Be Problem Improvers In Action: Tackling Ambiguity In Organizational Issues," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    9. Krzysztof Wach & Iveta Ubrežiová & Elena Horská, 2008. "Foreign Trade In Poland And Slovakia In The Process Of European Economic Integration," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    10. Brůha, Jan & Podpiera, Jiří, 2007. "Transition economy convergence in a two-country model: implications for monetary integration," Working Paper Series 740, European Central Bank.

    More about this item

    Keywords

    Inflation Bias; Quality Change; Transition Economies;

    JEL classification:

    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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