Assessing the Gap between Observed and Perceived Inflation in the Euro Area: Is the Credibility of the HICP at Stake?

National Bank of Belgium Working Paper No. 112

42 Pages Posted: 6 Oct 2010

See all articles by Luc Aucremanne

Luc Aucremanne

National Bank of Belgium

Marianne Collin

National Bank of Belgium

Thomas Stragier

National Bank of Belgium

Date Written: April 23, 2007

Abstract

We find strong econometric support for a break in the relationship between perceived and HICP inflation in the euro area, triggered by the introduction of euro notes and coins in January 2002. The break is fairly homogeneous across individuals with different socio-economic characteristics. We found no support for the thesis according to which perceptions are systematically formed by frequently purchased products. A similar break is found when national CPIs instead of HICPs are used as benchmarks. The role of the non-inclusion of owner-occupied housing in the HICP was negligible. Therefore the credibility of the HICP per se is not at stake.

Keywords: inflation, perceived inflation, panel unit roots tests

JEL Classification: C22, C23, D12, E31

Suggested Citation

Aucremanne, Luc and Collin, Marianne and Stragier, Thomas, Assessing the Gap between Observed and Perceived Inflation in the Euro Area: Is the Credibility of the HICP at Stake? (April 23, 2007). National Bank of Belgium Working Paper No. 112, Available at SSRN: https://ssrn.com/abstract=1687565 or http://dx.doi.org/10.2139/ssrn.1687565

Luc Aucremanne (Contact Author)

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Marianne Collin

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Thomas Stragier

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
67
Abstract Views
755
rank
417,244
PlumX Metrics