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A behavioral economics approach to perceived inflation

Published:
2016-06-05
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Tréfás, A. (2016). A behavioral economics approach to perceived inflation. Competitio, 15(1), 46-71. https://doi.org/10.21845/comp/2016/1/3
Abstract

Recent years have brought an era of extremely low inflation both in Hungary and in the EU. However, the inflation perceived by consumers has not followed precisely the same path. In the article I attempt to shed light on the underlying causes of this discrepancy, using the concepts of behavioral economics. A summary of the results of the relevant literature and an empirical analysis of Hungarian perceived inflation patterns (both on the aggregate level and for demographic groups) form the backbone of the article. The main findings of the research show that there is a significant bias in the inflation perceptions of Hungarian individuals, caused by psychological phenomena. The extent of the bias varies among sociodemographic groups, but not in exactly the same way as one would expect from the literature.

Journal of Economic Literature (JEL) codes: E03