| Abstract: |
I confirm the foregoing state of the art for inflation and well-being
correlation while filling the gap in the literature and estimating the effects
of individuals' inflation perception on well-being. I also discover the
significant heterogeneity in attitudes toward inflation, inflation perception,
and unemployment among European countries. Inflation measured by official
statistics, as well as inflation perceived by consumers, has a significant
negative influence on people's well-being. The relation was confirmed by
regressing reported life satisfaction on a wide set of individual
characteristics, as well as macroeconomic variables. While the inflation
perception influence on well-being in Eastern Europe is higher than the
influence of HICP, for Western Europe, it is the opposite. Both country groups
also differ in terms of the marginal rate of substitution between inflation
and unemployment – the effects of higher unemployment are more severe in
comparison to the influence of inflation in Western Europe. |