Index of Perceived Inflation or EU Consumer Surveys? An Assessment of Professor H. W. Brachinger's Approach

Abstract

This paper discusses an index of perceived inflation developed by Brachinger. Brachinger's index is not based on a survey and measurement of consumers' price perception. It is a model calculation derived from a number of more or less plausible ad hoc assumptions. We find that the results of Brachinger's model calculations cannot be reconciled with the responses to the EU consumer surveys, which are the only direct indicators of consumers' "true" inflation perception.

Keywords: perceived inflation, euro cash changeover, CPI, Germany

JEL Classification: C43, D8, E31