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Measuring inflation during the Pandemic with the benefit of hindsight

Author

Listed:
  • Chowdhury, Aftab

    (Cardiff Business School)

  • Dixon, Huw David

    (Cardiff Business School)

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 22 and underestimate in 11 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 (2020) and Reinsdorf (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

  • Chowdhury, Aftab & Dixon, Huw David, 2023. "Measuring inflation during the Pandemic with the benefit of hindsight," Cardiff Economics Working Papers E2023/17, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2023/17
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    References listed on IDEAS

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    1. Asger Lau Andersen & Emil Toft Hansen & Niels Johannesen & Adam Sheridan, 2022. "Consumer responses to the COVID‐19 crisis: evidence from bank account transaction data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(4), pages 905-929, October.
    2. Xavier Jaravel & Martin O'Connell, 2020. "Inflation spike and falling product variety during the Great Lockdown," IFS Working Papers W20/17, Institute for Fiscal Studies.
    3. Xavier Jaravel & Martin O'Connell, 2020. "High‐Frequency Changes in Shopping Behaviours, Promotions and the Measurement of Inflation: Evidence from the Great Lockdown," Fiscal Studies, John Wiley & Sons, vol. 41(3), pages 733-755, September.
    4. Kantur, Zeynep & Özcan, Gülserim, 2021. "What pandemic inflation tells: Old habits die hard," Economics Letters, Elsevier, vol. 204(C).
    5. Santiago E. Alvarez & Sarah M. Lein, 2020. "Tracking inflation on a daily basis," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-13, December.
    6. Jaravel, Xavier & O'Connell, Martin, 2020. "Real-time price indices: Inflation spike and falling product variety during the Great Lockdown," Journal of Public Economics, Elsevier, vol. 191(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    FCoronavirus (COVID-19); Pandemic; Inflation measurement; Household Final Consumption Expenditure (HHFCE); Consumer Price Index (CPI);
    All these keywords.

    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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