Measurement of the objective and subjective speed of inflation

Date of publication: April 1, 1995


This paper is devoted to a discussion of the influence of high inflation economies dominated in most countries of Eastern Europe and the former Soviet Union on the choice of marketing strategy and the ways to measure the speed of inflation. The first section of the paper outlines the distinction between objective and subjective aspects of inflation and discusses the main consequences of the two on the choice of marketing strategy. It shows that if objective inflation operates on a macro-economic level and affects the general marketing environment, the subjective speed of inflation (inflationary expectations) has an impact on patterns of consumer behavior and other psychological variables. This paper reviews different approaches of measuring the objective and subjective speed of inflation from the early method up to including new techniques. The empirical background consists of a series of cross-section and panel studies conducted by the Institute for Comparative Social Research (Moscow, Russia) between 1991-1994. New ways to overcome traditional difficulties of measuring objective inflation using the Consumer Price Index are introduced.

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