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Federal Reserve Bank of Dallas
Working Papers
An estimate of the measurement bias in the HICP
Mark A. Wynne

This paper provides an estimate of the measurement bias in the Harmonised Index of Consumer Prices (HICP) that the European Central Bank uses to define price stability in the euro area. The estimate is based on a comparison of the rate of increase in consumer prices as measured by the HICP and the responses to a question about recent changes in the cost of living on the European Commission’s monthly Harmonised Consumer Survey (HCS). I find that the HICP may overstate the true rate of inflation by about 1.0 to 1.5 percentage points a year.

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Mark A. Wynne, An estimate of the measurement bias in the HICP, Federal Reserve Bank of Dallas, Working Papers 0509, 2005.
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Keywords: Euro ; Inflation (Finance)
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