Do Households Misperceive the Price Level?
Author InfoJames M. Hvidding (Kutztown University) Abstract It has been widely held that nominal disturbances influence real economic activity by distorting the public’s perception of relative prices. Implicit in this hypothesis is the assumption that there is a lag in the public’s perception of the aggregate price level. This paper tests this assumption using the Michigan Survey data on inflation expectations. The econometric results refute the hypothesis that the public is ignorant of the current price level and fail to refute the hypothesis that the public is fully aware of the current consumer price index. There is no evidence of a perception lag in these data. Download InfoTo download: If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient a
