A new index of perceived inflation: Assumptions, method, and application to Germany

After the introduction of Euro notes and coins in January 2002, throughout the Economic and Monetary Union member countries a substantial discrepancy was evident between inflation as measured by the official consumer price indices (CPI) and that perceived by the general public. The starting point of this paper is the German case. First, the public controversy in Germany after the Euro changeover is sketched. Then conventional approaches to perceived inflation are reviewed including the many studies published by the German Federal Statistical Office as well as the perceived inflation balance generated within the EU Consumer Survey. In the main part of the paper, a novel approach to measuring perceived inflation is developed, the Index of Perceived Inflation (IPI). First, the hypotheses underlying this index are presented. Then, the IPI is derived. In the forth section the IPI is applied to the German data. The IPI time series for Germany from 1996 through 2005 shows a particularly high perceived inflation around the introduction of Euro notes and coins. In the fifth section the hypotheses of inflation perception underlying the IPI are critically reviewed. The paper closes with a conclusion on the insights gained through computation of the IPI.     

WHAT'S SO FUNNY ABOUT MAKING MONETARY POLICY?

During their meetings, the members of the Federal Open Market Committee (FOMC) make monetary policy, but they also make each other laugh. This article studies the amount of laughter elicited by members of the FOMC during their meetings. The study finds that a member elicits more laughter if he or she expects higher inflation, other things being equal. This finding suggests that members may use humor to cope with the threat of inflation. (JEL E52, E58, C23)     

Perceived inflation: The role of product accessibility and attitudes towards inflation

Little is known about the psychological mechanisms underlying judgments of perceived inflation as empirical evidence is sparse. In two studies, we investigated two factors that are expected to play a significant role in global judgments of perceived inflation: product accessibility and attitudes towards inflation. In Study 1 (N = 253), primed participants retrieved five products whose prices had increased (or decreased) in the past year before expressing a judgment of past inflation (versus non-primed participants with no retrieval task). In Study 2 (N = 101) participants were merely exposed to a series of products, and asked to estimate their frequency of purchase, before judging past inflation. In one condition, the prices of the majority of products had actually increased in the last year, while in another condition they had decreased. In both studies, attitudes towards inflation were also measured. Product priming consistently affected inflation judgments in the direction of an assimilation effect. Also, more negative attitudes towards inflation were associated with higher judgments of perceived inflation. Path analysis confirmed that both product accessibility and attitudes are potential bases for judgments of perceived inflation. These findings suggest that multiple psychological influences may underlie global judgments of perceived inflation.     

Expectations of inflation: The biasing effect of thoughts about specific prices

National surveys follow consumers’ expectations of future inflation, because these may directly affect the economic choices they make, indirectly affect macro-economic outcomes, and are considered in monetary policy. Yet, relatively little is known about how individuals form the inflation expectations they report on consumer surveys. Medians of reported inflation expectations tend to track official estimates of realized inflation, but show large heterogeneity between respondents, due to some expecting seemingly extreme inflation. We present two studies to examine whether individuals who consider specific price changes when forming their inflation expectations report more extreme and disagreeing inflation expectations due to focusing on specific extreme price changes. In Study 1, participants who were instructed to recall any price changes or to recall the largest price changes both thought of items for which price changes were perceived to have been extreme. Moreover, they reported more extreme year-ahead inflation expectations and showed more disagreement than did a third group that had been asked to recall the average change in price changes. Study 2 asked participants to report their year-ahead expectations of inflation, without first prompting them to recall specific price changes. Half of participants nevertheless thought of specific prices when generating their inflation expectations. Those who thought of specific prices reported more extreme and more disagreeing inflation expectations, because they were biased towards various items associated with more extreme perceived price changes. Our findings provide new insights into expectation formation processes and have implications for the design of survey-based measures of inflation.     

Audience Influence on EGM Gambling: The Protective Effects of Having Others Watch You Play

One component of social facilitation on gambling is the potential for an audience of people to observe the play of Electronic Gaming Machine (EGM) gamblers and influence their behaviour without participating directly in gambling themselves. An experiment was conducted with an audience of onlookers, purported to be students of research methods, taking notes while watching the participants play an EGM. Forty-three male and 82 female participants (N = 125), aged 18–79 (M = 49.2, SD = 15.6), played a laptop simulated 3-reel EGM using a $20 stake in three conditions: (1) alone, (2) watched by a simulated audience of six persons, or (3) watched by an audience of 26. Outcomes on the poker machine were rigged with a fixed sequence of five wins in the first 20 spins and indefinite losses thereafter. The results found smaller bet-sizes associated with larger audiences of onlookers, and this outcome is consistent with a hypothesized motivation to display more wins to the audience. Moreover, final payouts were greater in the audience conditions compared to the control, further suggesting that an audience may be a protective factor limiting player losses.     

The implementation and effects of Great Britain's National Lottery

This article reviews the implementation of the British National Lottery since the first draw took place in November 1994. It seeks to analyse the experience to date against the background of the concerns expressed prior to its introduction and of the regulatory objectives set by the framework legislation. It also considers the impact that the Lottery is having upon the formulation and implementation of regulatory policy affecting other gambling media. The six sections following the introduction deal in turn with the Lottery's income, permitted games, the participants, the good causes benefiting from its proceeds, its impact on other gambling media, and its place within British government policy concerning the regulation of commercial gambling.Since writing this article, some changes in the National Lottery have taken place (at 1 March 1996). The sales of scratchcards have now declined to £20m a week; 330m prizes totalling £2.7bn have been distributed and there have been 343 jackpot winners, 164 of whom have received in excess of £lm. OFLOT has commissioned research on the socio-economic condition of purchasers, which shows that the average weekly spend is £2.63, and that adults within the socio-economic group C2 have the highest spend (OFLOT, 1996). This research also shows that 22% of a sample of children between the ages of 12 and 15 were spending up to £5 a week on lottery tickets. The turnover for the first year is likely to be in the region of £5.5bn, which to date has produced £1.6bn for the good causes. The total turnover represents slightly less than 0.1% of Great Britain's gross national product. The Government's proposed changes to the regulation of casinos and bingo clubs were published in February (Home Office, 1996).     

INFORMATION RIGIDITIES,INFLATION PERCEPTIONS,AND THE MEDIA: LESSONS FROM THE EURO CASH CHANGEOVER

The objective of theoretical models of information rigidities is to capture the fact that people are constrained in their ability to acquire and process all available information. Given that most people obtain their information about the economy from the media, press coverage of the economy may exert an influence on peoples' attitudes. This paper tests for this influence by examining consumers' inflation perceptions in the aftermath of the euro cash changeover, which serves as a natural experiment. Using a new data set, that quantifies the intensity and tone of media reports, we document that media reporting has had a statistically significant and economically meaningful impact on inflation perceptions and contributed to their sharp rise in the aftermath of the euro cash changeover and to the divergence between inflation perceptions and actual inflation rates. (JEL E53, D83)     

Perceived inflation and expected future prices in different currencies

Five experiments were conducted to investigate whether perceived inflation and expected future prices are influenced by the nominal representation of increases in product prices in different currencies. In contrast to previous research demonstrating overestimates of the perceived inflation of product prices after the transition of the domestic German Mark to Euro [Greitemeyer, T., Schultz-Hardt, S., Traut-Mattausch, E., & Frey, D. (2005). The influence of price trend expectations on price trend perceptions: Why the Euro seems to make life more expensive? Journal of Economic Psychology, 26, 541–548; Traut-Mattausch, E., Schultz-Hardt, S., Greitemeyer, T., & Frey, D. (2004). Expectancy confirmation in spite of disconfirming evidence: The case of price increases due to the introduction of the Euro. European Journal of Social Psychology, 34, 739–760], the price increases were of normal magnitude (5% and 8%) and a larger set of prices was used including small weekly expenses, prices of durables, and rent. All experiments were conducted in Sweden (not member of the European monetary union) employing undergraduates who volunteered to participate in class settings without any financial compensation. The price increases were expressed in the same currency, either actual currencies (Swedish Crowns or Euros) or fictitious currencies with different units. In general inflation was underestimated, to a larger extent when the currency or the product prices were unfamiliar than familiar. It was also shown that product-specific price changes made it difficult to perceive inflationary price increases. Only marginal effects of currency unit were observed.     

Suppressing Asset Price Inflation: The Confederate Experience, 1861–1865

Confederate asset price stabilization policies appear to have increased the velocity of circulation and counterproductively channeled inflationary pressures into other areas of the economy. Three successive monetary reforms encouraged holders of Treasury notes to exchange these notes for bonds by imposing deadlines on their convertibility. We show that Confederate funding acts aimed at precipitating the conversion of currency into bonds did temporarily suppress currency depreciation. These acts also triggered upsurges in commodity prices, however, because note holders rushed to spend the currency before their exchange rights were reduced.     

EUROPEAN CENTRAL BANK FOOTPRINTS ON INFLATION FORECAST UNCERTAINTY

The finding of the paper shows the relative effectiveness of the “one size fits all” policy of the European Central Bank. The paper provides strong evidence in favor of this by testing whether the monetary policy effects (footprints) found in inflation uncertainty converge to a common level. These footprints are measured as the fraction of the estimated policy‐induced reduction in this uncertainty. The testing was conducted by applying a bootstrap‐type test in a regression of the rate of growth of these fractions on their initial values, computed for 16 euro area countries. (JEL C33, E52, E58)     

Reciprocal relations: The recognition and co-construction of caring with Alzheimer's disease

The literature on caring for people with Alzheimer's disease predominantly underscores the role of the care giver, largely ignoring the care receiver. Care is viewed as a service to mind someone rather than a compassionate act of shared relationship. Alzheimer's disease is portrayed as negatively influencing reciprocity in caring relationships, precipitating their gradual dissolution. We report findings from an ethnographic study that followed nearly 100 dyads of people with Alzheimer's disease and those who cared for them for more than 1 year. ‘Give and take’ in a relationship appears richer and more ambiguous than previously supposed; despite one party's cognitive losses, shared meanings can still be experienced by both people. In an in-depth examination of the narratives of co-carers, gathered during home visits, relationships were seen to be dynamic co-constructions built upon everyday events, interactions, environments and disease progression. Importantly, we show that people with Alzheimer's disease express insight and awareness despite decline.     

ALTERNATIVE P* MODELS OF INFLATION FORECASTS

This paper reevaluates the inflation forecast performance of M2-based P* models relative to other competing models over the period of 1970–96. Included in the comparative study are newly developed monetary aggregates, including M2+, MZM, and M2*, and direct treatments of velocity changes associated with recent developments in M2. Out-of-sample rolling-horizon forecast exercises suggest that the predictive accuracy of alternative P* model specifications relative to traditional inflation models is not robust to different subsamples. The switching forecast performance between money-based and output-based models across periods highlights the extent of structural instability in the inflation generating process. (JEL E3, E4, C2)     

Men's Self-Perceived Adequacy as the Family Breadwinner: Implications for Their Psychological, Marital, and Work-Family Weil-Being

Researchers note a link between men's changing role as the family breadwinner and declines in their personal and marital well-being. To explore this link more fully, two aspects of the breadwinner role, earner status (single- [n = 50], main-[n = 46], dual-earner [n = 43]) and self-perceived adequacy as the family breadwinner, were examined. Using analysis of variance, 139 family men are compared in terms of measures of psychological, marital, and work-family well-being. Self-perceived inadequate breadwinners (n = 51) report more depression and marital conflict than adequate breadwinners (n = 88). Men in single-earner families report less work-family stress than either main- or dual-earner men. If they perceive themselves as inadequate breadwinners, time conflicts between work and family responsibilities are a concern for men in main-earner families. If they view themselves as adequate breadwinners, dual-earner men report a greater sense of work-family role overload than if they view themselves as inadequate breadwinners.     

Bureaucratic power in note‐writing: authoritative expertise within the state

What produces the power of senior civil servants at ministries of finance, positioned at the top of the bureaucratic hierarchy? Max Weber has claimed that a hierarchical organization, meritocratic recruitment and procedural work provide bureaucracies with legitimacy. In particular he insisted on the role of Fachwissen (disciplinary knowledge) obtained through formal education. However, he also argued for the role of Dienstwissen, forms of knowledge and skills stemming from the experience of service in itself. Weber did not elaborate on this concept in detail, and few analysts of governmental expertise have examined this notion. We draw on the practice‐turn in sociology, combining the study of governmental expertise with micro‐sociological studies of administrative practices. By analysing interviews with 48 senior civil servants at the British, French and Norwegian ministries of finance about their daily practices, this article demonstrates that bureaucratic note‐writing and the procedural evaluation of such notes constitute a key form of expertise that yields authority. The study provides an analytical framework for understanding what administrative expertise consists of, how it is integral to procedural work, the forms bureaucratic hierarchies take in practice and how these three dimensions provide authority.     

Do As I Say and Not As I Think: Parent Socialisation of Lie‐Telling Behaviour

This study explored parent (N = 146) perspectives about situations in which they think it is acceptable to lie, how this corresponds to how they socialise their children about lie‐telling and their children's actual behaviour. Results indicated the methods parents report using to teach their children about the acceptability of lie‐telling are consistent with what they report teaching their children about lie‐telling overall. Also, the frequency of lies that children told (N = 88) to protect themselves from psychological distress or conflict differed between those who were taught that lying is sometimes acceptable versus those taught it is never acceptable.     

MONEY,OUTPUT, AND INFLATION IN THE LONGER TERM: MAJOR INDUSTRIAL COUNTRIES, 1880–2001

We study how fluctuations in money growth correlate with fluctuations in real output growth and inflation. Using band‐pass filters, we extract cycles from each time series that last 2–8 (business cycles) and 8–40 (longer‐term cycles) years. We employ annual data, 1880–2001 without gaps, for 11 industrial countries. Fluctuations in money growth do not play a systematic role at business cycle frequencies. However, money growth leads or affects contemporaneously inflation, but not real output growth, in the longer run. Also, formal break tests indicate no structural changes for the longer‐term money growth and inflation relationship, despite changes in policy regimes.(JEL E3)     

Doing Culture with Girls Like Me: Why Trying on Gender and Intersectionality Matters

Gendering is not a one‐size‐fits‐all process. Girls try on gender. In particular, girls – conditioned to value connections – search their cultural surroundings for ‘girls like me’ to answer the weighty question, Who am I? However, girls are not simply passive beneficiaries of culture, but actively construct their gendered selves by engaging in or ‘doing’ culture; girls activate certain features salient to their experiences. This paper examines how race, ethnicity, and class arbitrate girls’ gendered identities, emphasizing the concept trying on gender to capture the intersectional and experimental character of these processes. As girls try on gender –a local and culturally specific endeavor – they engage in a fluid, multifaceted, and sometimes tentative gendering process. Cross‐over literature by and for girls lends empirical support to how girls accomplish this multi‐constructed sense of self. The article concludes with implications for studies of girls, including a cautionary note about overemphasis on individualistic agency.     

Rates and correlates of recurrent psychiatric crisis episodes among children and adolescents in state custody

The purpose of this study was to determine the extent of and factors associated with recurrent psychiatric crisis episodes among children and adolescents in state custody. A total of 1362 children ages 3 to 16 years who were in custody of the child welfare agency and underwent a psychiatric crisis screening and services for the first time between 2001 and 2003 were followed for the same observation period of 24 months. Logistic regression was used to determine the clinical and non-clinical factors associated with a return to psychiatric crisis screening and services. Overall, 44.6% of the sample had another psychiatric crisis episode in the following two years. Nearly two thirds of those who returned did so within 6 months of their first crisis episode. A greater likelihood of recidivism was associated with severity of psychiatric illness, being female, white, in residential care placement, and having placement instability. Recurrent psychiatric crises appear to be predictable using readily available variables, which can inform interventions designed to reduce repeat episodes.     

Inflation in Transition Economies: An Empirical Analysis

The present research works with yearly data on backward looking measures of inflation i.e. GDP deflator series for Bulgaria, Czech Republic, Estonia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, and Slovakia. Because of the data limitations in the transition economies annual series are converted to smooth quarterly series before they are employed for inflation prognosis using state space models. The results show statistically significant evidence of time-varying volatility in Bulgaria, Czech Republic, Estonia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, and Slovakia using critical values obtained from χ₃² distributions. The results also show that the non-normality hypothesis cannot be rejected in all the series using critical values due McCulloch (J Bus Econ Stat 15:74–81, 1997). The efficiently estimated inflation forecast range between 0.925 for Bulgaria to 99.106 for Latvia. The estimated value of the characteristic exponent α of 2.000 for Hungary, and for the other countries having α equal to 1.999 shows tendency toward normal behavior in exception of Bulgaria, where α equals 1.861.