Kansu A.
SSRJ | Social Sciences Research Journal, ss.1-13, 2026 (Hakemsiz Dergi)
Özet
Abstract
Central banks primarily monitor price developments through headline Consumer Price Index (CPI) inflation during disinflation processes. However, in the Turkish economy during the period February 2023–February 2026, households did not perceive an equivalent improvement in inflation conditions despite the observed decline in headline inflation. This pattern suggests the existence of a systematic divergence between measured inflation and perceived inflation.
This study examines this divergence through the economy-wide diffusion of price increases and provides the first quantitative measure of the commonly expressed household observation that “inflation is falling, but it is not being felt.” To this end, the difference between the Behavioral Diffusion Index (BDI), developed through the Behavioral Diffusion Channel (BDC) to capture the diffusion of price increases across CPI main expenditure groups, and the Diffusion Index (DI) is defined as the Perceived Inflation Gap (PIG).
The findings indicate that price increases exhibited a high degree of diffusion throughout most of the analysis period, with the BDI remaining at elevated levels for more than 90% of the observed period. These results suggest that the diffusion of price increases serves as a key reference point for households and functions as an indicator of perceived inflation. The study further shows that the PIG represents an important perceptual blind spot that may limit the effectiveness of monetary policy in combating inflation. Although this framework is developed using the Turkish case, the proposed mechanism is not necessarily country-specific and may also provide a broader perspective on the perceptual and behavioral nature of inflation.
Keywords: Behavioral Diffusion Channel, Behavioral Diffusion Index, Perceived Inflation Gap, Monetary Policy Effectiveness
JEL Classification: E31, E52, D91, D03