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Licensed Unlicensed Requires Authentication Published by De Gruyter September 29, 2018

The Fairy Tale of Low Inflation in the Euro Area

  • Martin Hochstein EMAIL logo
From the journal The Economists’ Voice

Abstract

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.

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Published Online: 2018-09-29

©2018 Walter de Gruyter GmbH, Berlin/Boston

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