Inflationary Bias in Mid to Late Transition Czech Republic

A series of studies confirm results presented Filer and Hanousek (2000) suggesting that mismeasurement of inflation during the transition is a serious problem, on the same relative order of magnitude (and greater in absolute magnitude) as in advanced market economies. Overall, inflation has been overstated by more than 4 percentage points a year during the 1990s in the Czech Republic. By far the largest portion of this bias is due to uncaptured quality changes. In effect, Czech consumers are living considerably better after the fall of communism, but this increase in living standards has manifested itself through better quality rather than greater quantities of goods consumed.