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The Economists’ Voice

Ed. by Belke, Ansgar / Schnabl, Gunther

CiteScore 2018: 0.07

SCImago Journal Rank (SJR) 2018: 0.109
Source Normalized Impact per Paper (SNIP) 2018: 0.044

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Volume 15, Issue 1


The Fairy Tale of Low Inflation in the Euro Area

Martin Hochstein
  • Corresponding author
  • Allianz Global Investors GmbH Frankfurt, Global Economics and Strategy, Bockenheimer Landstraße 42, Frankfurt am Main, Germany
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Published Online: 2018-09-29 | DOI: https://doi.org/10.1515/ev-2018-0025


There are strong indications that actual consumer inflation in the euro area is understated by official price measures. The exclusion of homeowner shelter costs and inadequate quality adjustments for certain basket items are among the reasons for a potential downward bias in Eurostat's Harmonised Index of Consumer Prices, which would have widespread ramifications not only for consumers but also for the broader economy and financial markets. By focusing on the HICP as a yardstick for its primary objective of medium-term price stability, the European Central Bank relies on a too narrowly defined and error-prone inflation concept.

Keywords: Downward inflation bias; HICP; Hidden inflation; Inflation mismeasurement; Owner-occupied housing costs


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About the article

Published Online: 2018-09-29

Citation Information: The Economists’ Voice, Volume 15, Issue 1, 20180025, ISSN (Online) 1553-3832, DOI: https://doi.org/10.1515/ev-2018-0025.

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