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Perception of Inflation and Effect of Inflation on the Salariat in Ethiopia

TitlePerception of Inflation and Effect of Inflation on the Salariat in Ethiopia
Publication TypeJournal Article
Year of Publication2014
AuthorsHagos, MKassahun, Asfaw, M
JournalResearch Journal of Finance and Accounting
Volume5
ISSN2222-1697
Keywordsconcern on inflation, Ethiopia, inflation perception, salariat
Abstract

Understanding the gap between perceived and reported inflation have various implications both for the policy
makers and the general public, since its divergence can: undermine the official statics credibility, erode the
allocative efficiency of price system and influence future expectation of prices (Del Giovane et.al, 2008).
Similarly the rich are better able to protect themselves against, or benefit from inflation than are the poor is a
long established argument and was analyzed using data obtained from official sources. On the other hand
economists like Stanley fisher, Martin Ravalion and Robert .J. Shiller try to capture the effect of inflation on the
poor in an indirect way using survey on how the poor was concerned and dislike inflation. This paper also tries
to capture the perception of inflation of the salariat and its effect using an indirect way from survey of 300
salariat group from different parts of Ethiopia. In Ethiopia since the economy was not indexed and inflation was
highly persistence in the past ten or more years the salariat group are highly affected. For example when we see
the nominal income of those groups it was increased only 74% from 2003 to 2013 whereas average yearly
cumulated inflation in the same years was increased by about 176%. Therefore this paper also tries to capture
their perception and effects of those highly affected group of the society. A questioner survey of 300 people
was conducted and finds that sex and age have made no difference on inflation perception whereas income,
occupation, and others have made differences among people on inflation perception. Similarly people relatively
with less income are more concerned about inflation than relatively higher income.

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