Measuring inflation during the Pandemic with the benefit of hindsight

No E2023/17, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

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.

Keywords: FCoronavirus (COVID-19); Pandemic; Inflation measurement; Household Final Consumption Expenditure (HHFCE); Consumer Price Index (CPI) (search for similar items in EconPapers)
JEL-codes: C43 E01 E31 I10 (search for similar items in EconPapers)
Date: 2023-05
New Economics Papers: this item is included in nep-mon
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