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Do Households Misperceive the Price Level? Some Evidence from Survey Data

Author

Listed:
  • James M. Hvidding

    (Kutztown University)

Abstract

It has been widely held that nominal disturbances influence real economic activity by distorting the public's perception of relative prices. Implicit in this hypothesis is the assumption that there is a lag in the public's perception of the aggregate price level. This paper tests this assumption using the Michigan Survey data on inflation expectations. The econometric results refute the hypothesis that the public is ignorant of the current price level and fail to refute the hypothesis that the public is fully aware of the current consumer price index. There is no evidence of a perception lag in these data.

Suggested Citation

  • James M. Hvidding, 1991. "Do Households Misperceive the Price Level? Some Evidence from Survey Data," Eastern Economic Journal, Eastern Economic Association, vol. 17(1), pages 72-74, Jan-Mar.
    • Handle: RePEc:eej:eeconj:v:17:y:1991:i:1:p:72-74
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume17/V17N1P72_74.pdf
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    References listed on IDEAS

    as
    1. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-853, October.
    2. Bryan, Michael F & Gavin, William T, 1986. "Models of Inflation Expectations Formation: A Comparison of Household and Economist Forecasts: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 539-544, November.
    3. Michael P. Keane & David E. Runkle, 1989. "Are economic forecasts rational?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 13(Spr), pages 26-33.
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    More about this item

    Keywords

    Households; Inflation; Price Level; Prices;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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