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Assessing the sensitivity of consumption expenditure to inflation sentiment in post-communist economies

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  • Petar Sorić

Abstract

The aim of this article is to examine the influence of inflation sentiment on aggregate consumption. The study adds to the existing literature by i) emphasising the role of inflation perceptions and expectations in determining consumption patterns, ii) using structural VAR methodology that has not yet been applied in consumer studies, iii) employing an extensive dataset of eight individual post-communist countries (Czech Republic, Estonia, Hungary, Lithuania, Poland, Romania, Slovakia and Slovenia). Using innovation analysis it is shown that the theoretically expected conclusions are valid: consumers instantaneously decrease their consumption expenditure in response to shocks in perceived inflation, while their reaction to shocks in near-term inflation expectations is an abrupt (but temporary) consumption boost.

Suggested Citation

  • Petar Sorić, 2013. "Assessing the sensitivity of consumption expenditure to inflation sentiment in post-communist economies," Post-Communist Economies, Taylor & Francis Journals, vol. 25(4), pages 529-538, December.
    • Handle: RePEc:taf:pocoec:v:25:y:2013:i:4:p:529-538
    DOI: 10.1080/14631377.2013.844932
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    References listed on IDEAS

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    1. Nielsen, Hannah, 2003. "Inflation Expectations in the EU: Results from Survey Data," SFB 373 Discussion Papers 2003,13, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. Sommer Martin, 2007. "Habit Formation and Aggregate Consumption Dynamics," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-25, August.
    3. Henry Sabrowski, 2008. "Inflation Expectation Formation of German Consumers: Rational or Adaptive?," Working Paper Series in Economics 100, University of Lüneburg, Institute of Economics.
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    Cited by:

    1. Petr Janský & Klára Kalíšková & Daniel Münich, 2016. "Does the Czech Tax and Benefit System Contribute to One of Europe’s Lowest Levels of Relative Income Poverty and Inequality?," Eastern European Economics, Taylor & Francis Journals, vol. 54(3), pages 191-207, May.
    2. Del Missier, Fabio & Ranyard, Rob & Bonini, Nicolao, 2016. "Perceived inflation: The role of product accessibility and attitudes towards inflation," Journal of Economic Psychology, Elsevier, vol. 56(C), pages 97-106.
    3. Čižmešija Mirjana & Lukač Zrinka & Novoselec Tomislav, 2019. "Nonlinear optimisation approach to proposing novel Croatian Industrial Confidence Indicator," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 5(2), pages 17-26, December.

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